Home Insurance Trends Reflect Steady Rise in Loss Cost and Severity Across All Perils

Source: LexisNexis | Published on November 9, 2022

Home insurance costs

LexisNexis® Risk Solutions today released its seventh annual LexisNexis U.S. Home Trends Report, a source for economic home insurance and weather trends by peril severity, frequency, and location in the United States.

This year’s report, based on property exposures and losses from 2015 to 2021, reveals that, while loss cost and frequency decreased across all perils in 2021, the seven-year trend shows a steady increase over time. Furthermore, all peril severity increased 7% year over year in 2021, with Hail, Wind, and Weather-Related Water perils accounting for 95% of catastrophic losses, demonstrating that extreme weather events remain a major concern for U.S. homeowners and insurers.

“It is critical to provide the market with this seven-year data so that carriers can have a more balanced perspective and price risk within the context of long-term trends,” said George Hosfield, LexisNexis Risk Solutions’ senior director of home insurance. “Because of the unpredictability of extreme weather events like Hurricane Ian and their impact on catastrophic claims, as well as unforeseen events like the COVID-19 public health crisis, carriers simply cannot afford to assess their books of business with limited or skewed data.”

The states with the highest loss costs are Louisiana, Texas, Colorado, and Nebraska.

While the combined loss cost for all perils decreased in 2021, the loss cost for weather-related water, non-weather water, theft, and other perils increased. In particular, the frequency of Weather-Related Water claims increased by 329% in 2021, and the frequency of catastrophic claims increased by 222%, owing in part to the February storm in Texas, which caused many people to have broken pipes. The majority of catastrophe claims in 2021 were caused by hailstorms in Texas, hurricanes in Louisiana, and fires in California and Colorado. Louisiana and Texas had the highest loss cost in 2021, followed by Colorado and Nebraska, which had the highest average loss cost from 2015 to 2021.

The severity and cost of theft peril have reversed a five-year decline.

The U.S. Home Trends Report also looked at trends before and after COVID-19. As more people returned to work, the severity and cost of theft increased, reversing a five-year decline. In contrast, the liability peril continued its downward trend, with loss cost decreasing 13% and severity decreasing 23%. According to the report, the large overall decrease could be a continuation of the pandemic effects from 2020, when there were fewer social interactions and a lower availability of the legal system. A slew of other pandemic byproducts, including increases in worker absences due to variants and sub-variants, ongoing supply chain issues, material shortages, and rising home rebuilding costs, all had a significant impact on homeowners and home insurers.

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

  • Wind: Between 2020 and 2021, wind loss cost decreased 35% and frequency decreased 36%, while severity increased 2%. Hurricane Henri, Hurricane Ida, and several tropical storms drove the cost and severity of losses to a peak in August 2021. I
  • Hail: From 2020 to 2021, the loss cost of hail claims decreased by 18%, with 55% of Hail claims occurring in the second quarter. The United States experienced 3,763 major hailstorms this year. II
  • Fire and Lightning: Loss costs for Fire and Lightning decreased in 2021, but claim severity remained similar to that of 2020. In 2021, Colorado accounted for 42% of catastrophe Fire and Lightning losses, up from 1.2% in 2020, while California accounted for only 16%, a 75% decrease from 2020.
  • Non-Weather-Related Water: From 2020 to 2021, the cost of non-weather-related water loss increased by 8%, the frequency increased by 2%, and the severity increased by 6%. In 2021, California had the highest loss cost, 10% higher than Arizona.

“When we speak of the benefit of looking at trends over a seven-year period rather than just a one-year snapshot,” said Hosfield, “combined Wind and Hail peril data are a prime example of how home insurers can be caught off guard without the right amount of data in their arsenal.” “While it is a positive for insurers that Wind and Hail loss costs decreased in 2021 compared to 2020, the seven-year trend indicates an average increase of 18% per year.” This is just one example of how home insurance carriers can help meet loss-ratio and growth targets, as well as gain a better understanding of the risk associated with a specific location.”

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

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, 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.