Annual U.S. Home Trends Report Reveals Catastrophic Weather Events Continue to Drive Losses for Home Insurance Industry

Rhea-AI Summary

LexisNexis Risk Solutions published its sixth annual Home Trends Report, highlighting that extreme weather events have led to significant increases in weather-related loss costs for homeowners and insurers in the U.S. Catastrophic weather drove 39% of claims in 2020, marking the highest level in six years. Overall loss costs rose by 6% year-over-year, presenting challenges for carriers in pricing policies profitably. The report emphasizes the need for insurers to utilize the latest peril-related trend data to enhance underwriting decisions.

Positive

• Increased demand for accurate peril-related trend data for insurers.
• Potential for enhanced underwriting and pricing strategies based on recent data.

Negative

• Loss costs increased by 6% year-over-year, complicating profitable policy pricing.
• Catastrophic weather led to 39% of claims in 2020, the highest proportion in six years.
• States like Louisiana faced the highest loss costs due to severe weather.

ATLANTA, Oct. 26, 2021 /PRNewswire/ -- LexisNexis® Risk Solutions released its sixth annual LexisNexis Home Trends Report, revealing that increasing extreme weather events are leading to more weather-related loss costs for U.S. homeowners and insurers. The 2021 LexisNexis Home Trends Report provides the trended by-peril home insurance data and location-based insights that insurance carriers may need to make informed risk assessments and underwriting decisions.

LexisNexis Risk Solutions annual Home Trends Report revealed catastrophic weather caused highest losses in 6 yrs.

Catastrophic weather events, such as wildfires, hurricanes and floods, were some of the largest drivers of losses for the home insurance industry and caused 39% of claims in 2020 – the highest percentage in the last six years. Loss cost in 2020 also increased across all perils by 6% year-over-year, following the upward trend of the last six years, which will likely continue through 2021, making it increasingly challenging for carriers to price policies profitably.

"With catastrophe claims driving losses and reinsurance costs higher, it's imperative that insurers have the most recent peril-related trend data and an analytics partner who understands how by-peril trends are changing over time," said George Hosfield, senior director of home insurance at LexisNexis Risk Solutions. "Basing underwriting and pricing decisions on accurate and up-to-date data help insurers to meet loss-ratio objectives and growth targets, as well as support a better customer experience for consumers by helping homeowners avoid escalating costs."

Loss cost and frequency for all home perils combined rose in 2020, with certain states hit harder than others. Louisiana had the highest loss cost in the nation in 2020 as a result of wind claims from a detrimental hurricane season and 2021 has already brought a number of catastrophic weather events such as Hurricane Ida. In addition, Colorado and Nebraska ranked highest in loss cost over the period from 2015 to 2020 as a result of being located in "Hail Alley" and experiencing 7-9 days of hail each year.

The Home Trends Report also analyzed the impact of COVID-19 on the U.S. home insurance market. With more people working from home, loss cost due to theft was down significantly in 2020. Noted in the report, this is perhaps a result of increased adoption of smart home security devices. In 2020, the liability peril saw a 48% severity drop year-over-year, likely due to COVID-19 restrictions and social distancing measures, which led to court closures, limited access to legal representation and increased household isolation.

Additional key findings, by peril, from the LexisNexis Home Trends Report include:

• Wind: Wind frequency, loss cost and severity all increased significantly in 2020—frequency increased by 42% this year and loss cost by 63%. 2020 marked the largest wind loss cost recorded in the last six years.
• Hail: Loss cost and severity of hail claims declined in 2020, while frequency remained steady. However, catastrophe claims made up 62% of all hail claims this year and the frequency of hail catastrophe claims increased a significant 9.9% year-over-year.
• Fire and Lightning: The 2020 wildfire season, the most active on record, led to increases beyond 2017 and 2018 levels in both loss cost and severity for insurers. The proportion of catastrophe losses also increased. California accounted for the most loss cost, severity and frequency of fire and lightning claims, with 37.2% of all catastrophe claims nationwide in 2020.
• Non-Weather-Related Water: While the six-year trend for water claims not related to weather continued to climb, 2020 did see a decrease in loss cost compared to 2019 – likely a result of people spending more time at home and perhaps increased use of smart water leak detectors.

"This year has already been very active in terms of hurricanes and other major storms," said Hosfield. "We expect 2021 and the coming years to continue this trend, which means it will be even more important for insurers to adopt new data to better assess roof risk at both new business and on their renewal book. Insurers need to be armed with the best roof condition information available to optimize coverage decisions."

To download the 2021 LexisNexis Home Trends Report, click here.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

Media Contacts:
Amanda Howard
LexisNexis Risk Solutions
Phone: +1.678.231.4890
amanda.howard@lexisnexisrisk.com

Mollie Holman
Brodeur Partners for LexisNexis Risk Solutions
Phone: +1.646.746.5611
mholman@brodeur.com

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SOURCE LexisNexis Risk Solutions

FAQ

What does the 2021 LexisNexis Home Trends Report reveal about extreme weather events?

The report indicates that extreme weather events have significantly raised weather-related loss costs, accounting for 39% of claims in 2020.

How have loss costs changed in the home insurance industry according to the report?

Loss costs increased by 6% year-over-year, marking a continuing upward trend.

What factors contributed to the highest claims percentage in six years?

Catastrophic weather events such as hurricanes, floods, and wildfires were primary drivers.

How are insurers impacted by the findings in the Home Trends Report?

Insurers face challenges in pricing policies profitably due to rising loss costs and increased catastrophe claims.

What measures can insurers take based on the report's findings?

Insurers are encouraged to leverage up-to-date peril-related trend data for better underwriting and pricing decisions.