Jan 5, 2023

Home Insurance Trends to Look Out For in 2023

As the new 2023 year has begun, there are definitely certain home insurance trends that may continue into this new year. According to the Insurance Information Institute (III)’s TRIPLE-I BRIEF in February of 2022 there were some key drivers of homeowners insurance rate increases:

- Rising catastrophe losses related to extreme weather

- Population shifts into disaster- prone regions

- Increasing home repair and rebuilding costs

In addition, the LexisNexis Risk Solutions which is a data analytics company also released its 7th annual LexisNexis U.S. Home Trends Report back in October of 2022. From the LexisNexis report, it concluded that over the last seven years, the U.S. Home insurance industry has experienced an upward trend in loss cost and severity across all perils. Two of the key drivers as stated above from the III was also found in the LexisNexis report, rising catastrophe losses related to extreme weather and increasing home repair and rebuilding costs. Here are some additional findings from the LexisNexis U.S. Home Trends Report:

- In 2021, while loss cost and frequency decreased across all perils, average severity increased by 7%.

- 95% of catastrophic losses were the result of Hail, Wind, and Weather-Related Water perils from 2020 to 2021.

- Wind and Hail loss cost follows a steady upward trend. The seven -year trend for wind and hail indicates an average increase of 18% per year. According to the III, Hail -related insured losses between 2000 and 2019 averaged between $8 billion to $14 billion a year, according to Aon. There were 3,763 major hailstorms in 2021, according to the NOAA’s Severe Storms database.

- In 2021, loss cost for Fire and Lightning decreased, but the severity of claims remained at a level similar to that of 2020.

- Non-Weather related water loss cost increased 8% and frequency increased 2% from 2020 to 2021. Severity increased by 6% in 2021. Non-Weather-related perils addresses claims that are due to water damage from accidental water discharge, such as leaking pipes and appliances, which are considered the most preventable of major loss cost events. (47% of homebuyers made an offer on a home in 2020-2021 without physically touring the property.)

- Core inflation rates remain high as the price of labor and material rises, so does home repairs costs. Claims are becoming more expensive and complex as home technologies become more sophisticated.

- 2021 saw a 222% increase in catastrophe claim frequency from weather related water damage. High-cost weather disasters are trending upward- at the same time, carrier and homeowner risk is increasing.

- Theft loss cost and severity increased in 2021 and could be linked to people returning to the office and leaving their home unattended for longer periods of time.

- Liability loss cost decreased by 13% from 2020 to 2021, while severity decreased by 23%. On average for the last seven years, there has been a spike in frequency during the summer months. This could be due to the surge in outdoor activities, and subsequent increase in pool, hot tub, and trampoline claims.

Begin this new year carefully reviewing your insurance policies with your independent agent. As inflation is having a huge impact on homeowners insurance policies, homeowners and home insurers need to ensure that home policies continued to be insured to value. Keep in mind, the replacement cost of your home differs greatly from its current market value. Here are some questions to consider when reviewing your insurance policies:

Home Insurance:

Does my policy provide enough coverage to rebuild my home today?

How does my recent remodeling affect my policy?

Do I need extended coverage for valuables?

Do I qualify for any discounts?

Vehicle Insurance:

Does my carrier insure all the vehicles in my household?

Are all licensed drivers of the household listed on my auto policy?

Are my recreational vehicles covered (boat, motorcycle, ATV, golf cart, etc.)?

Do I have coverage if I am injured by someone who doesn’t have insurance or doesn’t have enough to cover my injuries?

Does my driving-age child qualify for a good-student discount?

Life Insurance:

Your life insurance often needs to change as your life changes. That’s why you will want to schedule a life insurance review after a major life event. Life events that should trigger a review of life insurance include:

- Getting married

- Getting divorced

- Buying a house

- Having or adopting a baby

- Accepting a new job

- Receiving a substantial raise or promotion

- Taking out a mortgage or other loan

- Refinancing your home

- Paying off your mortgage

- Buying a business

- Selling a business

- Receiving an inheritance