Home insurance has increased for homeowners as loss costs across all perils rise: LexisNexis

The US home insurance industry has experienced an upward trend in loss cost across all perils combined over the past seven years, resulting in catastrophic claims which in turn contribute to rising premiums, LexisNexis stated in a recent report.

According to the 2024 LexisNexis Home Trends Report, all peril lost cost and frequency have increased by 4.1% and 11%, respectively, from 2022 to 2023 and 52% and 16.9%, respectively, since 2019.

The perils highlighted in the report include hail; wind, water, fire and lightning; and non-weather related claims such as water leaks, thefts or liability.

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 events in the US increased in 2023, with the country experiencing 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.

The report also revealed that wind peril has increased in frequency, rising 4.8%, along with a loss cost increasing 0.7% from 2022-2023. Severity, by comparison, fell 12.3% year-over-year.

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.

On the other hand, weather-related water perils declined in 2023 with a reduction in loss cost (-51.4%), frequency (-25.5%) and severity (-34.8%). However, 61% of weather-related water claims were catastrophic according to the report.

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.

Cole Winans, vice president, home insurance, LexisNexis Risk Solutions, commented: “In the last year, the US 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.

“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.”

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