LexisNexis U.S. Home Trends Report Highlights Impact of Severe Storms as Catastrophic Claims Climb to Record Levels

Rhea-AI Summary

LexisNexis Risk Solutions has released its ninth annual U.S. Home Trends Report, providing insights into the home insurance industry. Key findings include:

- All Peril loss cost and frequency increased by 4.1% and 11% respectively from 2022 to 2023, and by 52% and 16.9% since 2019.

- Catastrophe claims represented 46% of all claims in 2023, the highest in seven years.

- Hail loss cost increased 57.9% since 2022, with frequency up 53.6% and severity rising 2.8%.

- States with the highest impact of hail-related perils include Colorado, Nebraska, and Wyoming.

- Loss costs for Fire and Lightning (-11.1%) and Weather-Related Water (-51.4%) declined from 2022-2023.

The report highlights the impact of severe storms and historic-level weather disasters on rising insurance premiums, emphasizing the need for insurers to understand by-peril trends and maintain extensive data to remain competitive in a volatile market.

Positive

• All Peril loss cost and frequency increased by 4.1% and 11% respectively from 2022 to 2023
• Hail loss cost increased 57.9% since 2022, with frequency up 53.6% and severity rising 2.8%
• Non-Weather-Related Water loss cost decreased by 11.2% from 2022-2023

Negative

• Catastrophe claims represented 46% of claims across all perils in 2023, the highest in seven years
• Loss cost for Fire and Lightning declined 11.1% from 2022-2023
• Weather-Related Water loss cost decreased by 51.4% from 2022-2023
• Severity remains 29.8% higher than 2019 figures despite a 6.3% decline since 2022

Insights

Insurance Industry Analyst

The 2024 LexisNexis Home Trends Report reveals significant challenges for the U.S. home insurance industry. The 4.1% increase in all-peril loss cost and 11% rise in frequency from 2022 to 2023 indicate growing risks and potential profitability pressures for insurers. The 52% increase in loss cost since 2019 is particularly alarming, suggesting a long-term trend that may require substantial premium adjustments.

Catastrophic claims reaching 46% of all claims in 2023 - a seven-year high - highlights the increasing impact of severe weather events on insurers' bottom lines. The 57.9% surge in hail loss cost is especially noteworthy, potentially leading to significant rate increases in affected states like Colorado, Nebraska and Wyoming.

While some perils saw decreases (e.g., Fire and Lightning, Weather-Related Water), the overall trend remains concerning. Insurers will likely need to reassess their pricing models, risk assessment strategies and potentially their geographic exposure to maintain profitability in this volatile environment.

Climate Risk Specialist

The report underscores the growing influence of climate change on the insurance industry. The record-breaking 28 weather and climate disasters exceeding $1 billion in damages in 2023 signals a new normal of increased catastrophic events. This trend is likely to continue, putting pressure on insurers to adapt their models and pricing strategies.

The significant variations in loss cost and severity across states highlight the need for more granular, location-specific risk assessment. Colorado's 274% above-average catastrophic loss cost and Hawaii's 63% above-average severity demonstrate the localized nature of climate risks.

Insurers must invest in advanced climate modeling and data analytics to accurately price risks and manage exposure. The industry may also need to collaborate with policymakers on resilience measures and explore innovative risk transfer mechanisms to remain viable in high-risk areas. This climate-driven volatility could lead to reduced coverage availability in certain regions, potentially creating protection gaps.

2024 LexisNexis Home Trends Report highlights why home insurance has increased for homeowners as loss costs across all perils rise for the fifth year in a row

ATLANTA, Oct. 16, 2024 /PRNewswire/ -- LexisNexis® Risk Solutions today released its ninth annual LexisNexis U.S. Home Trends Report, providing an updated view of by-peril trends in the U.S. home insurance industry to help insurers make more informed business decisions to be better positioned for profitable growth, and help them educate consumers on home insurance trends that impact their policies. In addition to insights into loss cost, frequency and severity, the report includes details about seasonality, distribution of catastrophe claims and geographic trends.

Key Takeaways

• All Peril lost cost and frequency increased by 4.1% and 11%, respectively, from 2022 to 2023 and 52% and 16.9%, respectively, since 2019.
• While severity has declined 6.3% since 2022, it remains 29.8% higher than 2019 figures.
• Catastrophe claims represented 46% of claims across all perils combined in 2023, the highest in seven years.
• Hail loss cost increased 57.9% since 2022, along with frequency (up 53.6%) and severity rising 2.8% year over year from 2022. States with the highest impact of hail-related perils include Colorado, Nebraska and Wyoming.
• Lost cost for other weather-related perils declined across Fire and Lightning (down 11.1%) and Weather-Related Water (down 51.4%) from 2022-2023. Non-Weather-Related Water loss cost decreased by 11.2% in the same period but remained on an upward trend over the past seven years.

"In the last year, the U.S. saw several historic-level weather disaster events and the highest level of catastrophic claims across all perils we've seen in the past seven years, which contributes to rising premiums that consumers across the country face right now," said Cole Winans, vice president, home insurance, LexisNexis Risk Solutions. "As home insurance carriers continue to contend with seasonal and geographic variabilities related to climate – in addition to rising inflation, material and labor costs – understanding by-peril and macro level home insurance trends coupled with maintaining extensive data and imagery on current house conditions over an extended period of time is imperative to remain nimble in today's volatile and dynamic market. Even as more insurers are likely to see rate increases approved in certain states in the coming months, they will need to be discerning in writing new business only in those pockets where they can do so profitably and that will be on a carrier-by-carrier and state-by-state basis."

All Peril Trends

• The U.S. home insurance industry has experienced an upward trend in loss cost across all perils combined over the past seven years. These figures include all perils highlighted below: hail; wind, water, fire and lightning; and non-weather related claims such as water leaks, thefts or liability.
• Despite the severity reduction in 2023 (6.3% down from 2022), severity's elevation above 2019 (up 29.8%) points to the importance of long-term trend data when evaluating risk and pricing.
• Colorado ranks highest in loss cost from catastrophic claims (274% above 2023 U.S. average catastrophic loss cost), while the severity of claims (dollars lost, on average, per claim paid) in Hawaii was well above any other U.S. state in 2023 (63% above 2023 U.S. average severity).
• U.S. states with the highest combined catastrophe and non-catastrophe loss costs include Colo., Minn., Neb., La. and Iowa. Lowest ranking states include Mass., N.H., W. Va., Vt. and Maine.

A Year of Hail

• In 2023, the U.S. experienced 6,962 hail events, up 57.3% from 2022, with 71% of hail claims deemed catastrophic.
• With 28 weather and climate disasters in 2023, each surpassing the billion-dollar damage threshold, 17 were attributed to severe weather or hail events.
• Hail peril seasonality over the past seven years continues, with April, May and June observing the highest frequency and loss cost in 2023.

Wind, Water, Fire and Lightening Perils

• Wind peril frequency rose 14.8%, along with a loss cost increasing 0.7% from 2022-2023. Severity, by comparison, fell 12.3% year-over-year. Despite seasonal loss cost averages peaking in August and September over the past seven years, 2023 loss cost and frequency were highest in March.
• In 2023, 62% of Wind claims were deemed catastrophic claims, up from 52% the year prior.
• Fire and Lightning perils in 2023 saw decreases across loss cost (-11.1%), frequency (-8.6%) and severity (-2.7%) from 2022. However, catastrophic claims rose 7% from 2023, with the wildfire on the island of Maui, Hawaii, being one of the most damaging and deadly events in 2023.
• Weather-Related Water perils declined in 2023 with a reduction in loss cost (-51.4%), frequency (-25.5%) and severity (-34.8%). In 2023, 61% of weather-related water claims were catastrophic.

Non-Weather-Related Perils

• Addressing claims related to water damage, such as leaking pipes and appliances, Non-Weather-Related Water perils decreased across loss cost (-11.2%), frequency (-10.3%) and severity (-1.1%) in 2023.
• While Theft loss cost and frequency decreased by 14.2% and 15.8%, respectively, in 2023, severity rose by 1.9%, partially attributed to the rising cost of consumer goods such as high-end kitchenware.
• Despite the marginal increase in severity (0.2%), Liability peril decreased regarding loss cost (down 18.2%) along with frequency (-18.3%) in 2023.
• Other perils, including physical damage claims not included elsewhere, extended coverage, damage to property of others, etc., saw a frequency increase of 9.3% year-over-year. Loss cost, along with severity, both declined 10.7% and 18.3%, respectively, from 2022 to 2023.

"When we look at peril data over a seven-year span, it's increasingly clear that home insurers cannot rely on short-term trends alone to make fully informed decisions about their books of business and operational strategies," said George Hosfield, associate vice president, home insurance, LexisNexis Risk Solutions. "For example, while hail loss cost surged by 57.9% in a one-year observance, the longer-term trend shows consistent increases across all perils year-over-year. This emphasizes the need for carriers to consider broader historical data when evaluating risk and adjusting pricing strategies to help support their long-term profitability."

Download the latest LexisNexis U.S. Home Trends Report.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data, sophisticated analytics platforms and technology solutions to provide insights that help businesses across multiple industries and governmental entities reduce risk and improve decisions to benefit people around the globe. 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-based analytics and decision tools for professional and business customers. For more information, please visit www.risk.lexisnexis.com, and www.relx.com.

Media Contacts:
Chas Strong
LexisNexis Risk Solutions
Phone: +1.706.714.7083
Charles.Strong@lexisnexisrisk.com 

 

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FAQ

What are the key findings of the 2024 LexisNexis U.S. Home Trends Report for RELX?

The report shows All Peril loss cost and frequency increased by 4.1% and 11% respectively from 2022 to 2023. Catastrophe claims represented 46% of all claims in 2023, the highest in seven years. Hail loss cost increased 57.9% since 2022, while loss costs for Fire and Lightning and Weather-Related Water declined.

How has hail impacted home insurance trends in 2023 according to the LexisNexis report for RELX?

In 2023, the U.S. experienced 6,962 hail events, up 57.3% from 2022. Hail loss cost increased 57.9%, frequency rose 53.6%, and severity increased 2.8% year over year. 71% of hail claims were deemed catastrophic, with Colorado, Nebraska, and Wyoming being the most impacted states.

What are the top U.S. states with the highest combined catastrophe and non-catastrophe loss costs in 2023 according to LexisNexis for RELX?

According to the LexisNexis U.S. Home Trends Report, the states with the highest combined catastrophe and non-catastrophe loss costs in 2023 are Colorado, Minnesota, Nebraska, Louisiana, and Iowa.

How have non-weather-related perils changed in 2023 based on the LexisNexis report for RELX?

Non-Weather-Related Water perils decreased across loss cost (-11.2%), frequency (-10.3%), and severity (-1.1%) in 2023. Theft loss cost and frequency decreased by 14.2% and 15.8% respectively, while severity rose by 1.9%. Liability peril saw decreases in loss cost (-18.2%) and frequency (-18.3%), with a slight increase in severity (0.2%).