December 5, 2021

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For Home Insurers, Weather Proves More Costly While COVID Measures Lower Claims

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Catastrophic weather events such as wildfires, hurricanes and floods caused 39% of home insurance claims in 2020 – the highest percentage in the last six years.

According to the 2021 LexisNexis Home Trends Report, the loss cost in 2020 also increased across all perils by 6% year-over-year, following the upward trend that the report says will likely continue through 2021.

While the loss cost and frequency for all home perils combined rose in 2020, certain states were hit harder than others. Louisiana had the highest loss cost in the nation in 2020 as a result of wind claims from the 2021 hurricane season.

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 to 9 days of hail each year.

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LexisNexis researchers 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. The report notes that this is perhaps also 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 findings, by peril, 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, which the report says is likely a result of people spending more time at home and perhaps increased use of smart water leak detectors.

The report provides trended by-peril home insurance data and location-based insights to help insurance carriers make risk assessments and underwriting decisions.

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“This year has already been very active in terms of hurricanes and other major storms,” said George Hosfield, senior director of home insurance at LexisNexis Risk Solutions. “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.”

Source: 2021 LexisNexis Home Trends Report

Topics COVID-19 Carriers Claims Homeowners

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