LexisNexis &reg; Home Trends Report

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Overall Trends

Colorado and Nebraska Arizona and California Texas and Nevada

Overall Trends - All Peril

In 2018, All Peril loss cost increased slightly compared with 2017 levels.

All Peril loss cost increased by 2% compared to 2017; while frequency decreased, claim severity increased by 17%.

While catastrophe claim counts decreased from 2017 to 2018, severity increased—largely driven by hurricanes and wildfires.

Many in the industry hoped the 2017 spike in loss cost was a singular event. However, All Peril loss cost for 2018 was similarly high, due to another ferocious California wildfire season, as well as Hurricanes Michael and Florence. Notably, the severity of this year’s hurricane season is reflected in a spike in November’s claim severity.

Catastrophe claim counts decreased; however, loss cost increased from 2017 levels.

LexisNexis internal analysis shows that in 2018, claim severity for catastrophe claims increased by more than 40%, primarily due to hurricanes and wildfires. In particular, claim severity was 42% higher than average in November, with California wildfires contributing to more than 70% of that month’s total loss amount.

Collectively, California, Colorado, Florida and North Carolina were responsible for 56% of the nation’s catastrophe claims. These states accounted for 36% and 17% of the catastrophe claims in 2017 and 2016, respectively. Finally, Colorado and Nebraska ranked highest in loss cost over the six-year period from 2013 to 2018, with Colorado ranking highest in 2018.

The escalating costs of weather and climate disasters

With a price tag of $91 billion, 2018 was the fourth most expensive year since 1980 for weather and climate disasters in the United States. The National Centers for Environmental Information (NCEI) reports that since 1980, the United States has experienced 246 weather events for which the costs reached or exceeded $1 billion.¹ Combined, the total cost of these events exceeds $1.5 trillion.

While catastrophe claim counts decreased from 2017 to 2018, severity increased—largely driven by:

Hurricanes

Wildfires

Both

Incorrect.

Both hurricanes and wildfire were responsible for the increase in claim severity from 2017-2018.

Which two states ranked highest in loss cost over the six-year period from 2013 to 2018?

Incorrect.

Colorado and Nebraska ranked highest in loss cost from 2013-2018

Back

Correct!

Colorado and Nebraska ranked highest in loss cost from 2013-2018

Back

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By-Peril Trends

As highlighted in our Insurance Insights blog

Key Trends – By-Peril Trends

Wind

Hail

Fire

Water

Theft

Liability

Other

Wind Loss Trend

Select a state to see its
individual wind loss trend

Wind loss cost fell from 2017 levels, but is still significantly higher than levels observed between 2013 and 2016.

In 2018, Wind loss cost dropped by 9%, primarily driven by decreasing frequency; however, severity continued its steep increase from 2016.

Select a state to see its
individual hail loss trend

In terms of Wind severity, 2018 was the worst year of the six-year period (2013–2018) covered by this report.

Loss cost peaked in September and October, driven by hurricane activity in North Carolina and Florida.

, Hurricane Florence resulted in September 2018 being 17 times more costly than a typical September in North Carolina. In addition, Hurricane Michael drove year-over-year averaged losses for October 2018 that were nearly 13 times greater than in October 2017.

The proportion of catastrophe Wind claims dropped 3 percentage points, from 58% in 2017 to 55% in 2018.

The proportion of Wind catastrophe claims dropped in 2018. However, a decrease in frequency was accompanied by a sharp spike in claim severity.

Wind Peril Location

Claim severity in 2018 was 15% higher than in 2017.

Where hurricanes hit can determine the level of loss

Several factors can drive Wind loss cost upward, year-over-year, even though there may be fewer events. For example, coastal areas are desirable places to live—and have higher hurricane risk. As populations increase in these areas, catastrophic winds can cause more widespread damage. In addition, escalating real estate prices in these areas drive up the costs of reconstruction.

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Hail

Wind

Hail

Fire

Water

Theft

Liability

Other

Hail Loss Trend

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individual hail loss trend

Hail loss cost decreased by 33% from 2017 to 2018.

A significant drop in Hail frequency led to a sharp decrease in loss cost for this peril. April and May are the worst months for Hail, and accounted for nearly 42% of claims over the six-year period covered by this report.

Select a state to see its
individual hail loss trend

Month to Month Hail Seasonality

Severity remained at approximately the same level as 2017.

Hail Trend Catastrophe Claims

The proportion of Hail catastrophe claims remained steady.

Severity for Hail claims in Texas decreased by 12% in 2018.

Overall, Texas continued to top the nation for Hail claims, representing 29% of claim volume. Colorado ranked second, with nearly 17% of claims.

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Fire

Wind

Hail

Fire

Water

Theft

Liability

Other

Fire Loss Trend

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individual fire loss trend

Fire loss cost increased by 51% compared with 2017.

While 2017 was regarded as one of California’s worst years for wildfires, 2018 proved to be even more deadly and destructive. A spike in Fire loss cost, primarily driven by catastrophe claims, may have been due to the number of structures that were total losses, as well as the real-estate values of homes in the affected areas.

Select a state to see its
individual fire loss trend

Month to Month Fire Seasonality

Severity increased by 46% while frequency remained stable.

Catastrophe Fire losses were four times higher in 2018 than 2017.

Catastrophe claims accounted for nearly 40% of Fire losses in 2018—the highest in 10 years and a significant jump from the previous high of 15% in 2017.

California accounted for more than 95% of catastrophe Fire losses in 2018.

Wildfires in California in 2018 were some of the most expensive on record. Significant contributors were the Creek Fire (January), Mendocino Complex and Carr Fires (July/August) and Camp Fire (November). Camp Fire was one of the deadliest and most destructive fires in California history.2 More than 18,000 structures were damaged or destroyed,3 and claim severity was the highest in a decade—more than twice the claim severity for 2017's Tubbs, Nuns and Atlas fire events combined.⁴

Devastation in Paradise

The city of Paradise, Calif., was almost entirely destroyed by the Camp Fire. Total projected economic costs have been estimated at $15 billion—exceeding the record set in 2017 and setting a new record for insured losses from wildfire. Another dubious record was set in 2018, for the largest area burned: 82 million acres.⁵

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Water

Non-Weather Related Weather Related

Wind

Hail

Fire

Water

Theft

Liability

Other

Water is categorized into two sections: non-weather related water perils and weather related water perils. Please select a category to continue.

NON-WEATHER RELATED

Water Loss Trend

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individual water loss trend

Loss cost increased by 8%.

This peril addresses claims related to water damage from accidental water discharge, such as pipe and appliance leakage. Similar to Theft and Liability, this peril is not expected to be influenced by catastrophe events.

Select a state to see its
individual water loss trend

Water Seasonality Claims Severity

Claim severity increased by 6% while claim frequency remained relatively stable.

Non-Weather Water Catastrophe Claim Distribution

Catastrophe claims accounted for 2% of this peril’s claims—a modest increase from 1% last year.

Non-Weather Loss Costs

New Jersey and Maryland continued to remain the top two states in terms of loss cost. As noted last year, claim severity is particularly high in Florida, which ranked in the top five. Assignment of Benefits (AOB), which enables third parties to independently file claims, make repair decisions and collect insurance payments and is prevalent in Florida, may be one contributing factor to rising costs in the Sunshine State.⁶

Weather Related

WEATHER RELATED

Water Loss Trend

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individual water loss trend

Weather Related Water Loss Costs

Loss cost increased by 21% from 2017.

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individual water loss trend

Frequency increased by 13% and severity increased by 8%.

January and February continue to be the worst months for this peril. In general, January is the costliest month for Weather Related Water claims, with loss cost typically 80% higher than the annual average.

Weather Water Catastrophe Claim Distribution

Catastrophe and non-catastrophe distribution remain level with 2017.

The top five states in terms of loss cost remain the same as in 2017.

However, Maryland had the highest loss cost in 2018, primarily due to record low temperatures in January. The first week of 2018, Baltimore experienced the coldest start to any year on record.7 The severity of freeze claims in January 2018 was 45% higher than the six-year average.

Non-Weather Related

Climate Change and Weather Events

According to the National Climate Assessment, climate change has been affecting weather events in the Midwest for several decades.8 Events like extreme flooding have the potential to disrupt multiple industries, including agriculture, forestry and transportation, as well as the health of the Great Lakes.

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Theft

Wind

Hail

Fire

Water

Theft

Liability

Other

Theft Loss Trend

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theft loss trend

Theft loss cost continued to steadily decline.

The continued trend of declining Theft loss cost is driven by a consistent decline in frequency. However, when theft does occur, it results in expensive losses as suggested by increasing claim severity.

Select a state to see its
theft loss trend

Nevada and Washington D.C. again topped the nation in terms of loss cost.

Decreasing Theft frequency may due to the growing affordability of home security alarms. By 2020, home security systems will account for an estimated $47 billion of the total global security market.9 In addition, homes without security systems are 300% more likely to be broken into. The Electronic Security Association reports that 9 out of 10 burglars said they would not attack the home if they encountered an alarm or home security system.¹⁰

Despite a drop of 12%, Nevada remained the state with highest Theft loss cost—for the fourth straight year.

In addition, Washington D.C. continued its eight-year streak for the nation’s highest Theft frequency, despite a drop of 14% from 2017 to 2018. Elevated Theft frequency in Washington D.C. is partially due to the low number of exposures in the District; its claim counts are on par with states like Delaware and Montana.

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Liability

Wind

Hail

Fire

Water

Theft

Liability

Other

Liability Loss Trend

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liability loss trend

Liability lost cost, frequency and severity continued to decline steadily.

In general, the industry has seen a favorable trend for the Liability peril, as frequency and severity continue to decline. Macroeconomic events, such as GDP and employment levels, tend to have bearing on this peril.

Select a state to see its
liability loss trend

Frequency and severity continued the declining trend that began in 2015.

The traditional spike in frequency during summer could be due to an increase in outdoor activity, such as the use of pools, hot tubs and trampolines. Connecticut and California continue to remain the top two states for loss cost.

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Other

Wind

Hail

Fire

Water

Theft

Liability

Other

Other Perils Loss Trend

Select a state to see its
other perils loss trend

Other Perils Loss Costs

Loss cost remains the same as in 2017, due to equivalent decrease in frequency and increase in severity.

Select a state to see its
other perils loss trend

Other Perils Month to Month

Perils in this category include physical damage claims not included elsewhere, extended coverage, damage to property of others, medical payments and more. Due to inconsistencies in how different carriers report Other Perils, it is difficult to draw further conclusions. That said, this peril can be an indicator of regional or emerging trends.

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Conclusion

Healthier book of business

Conclusion

Report Highlights

The 2019 LexisNexis Home Trends report highlights some of the challenges that home insurance carriers face in managing by-peril risk. For example, in 2018, hurricanes and wildfires again had a devastating impact on certain states—primarily driven by increasing severity, not frequency. In addition, while this report provides a by-peril look at the 2018 accident year, carriers must also consider cross-peril interactions. For example, mudslides are more common after fire and rain, and the combination of weather can destabilize hillsides. Similarly, thefts can spike after natural disasters. Carriers should consider these events not as isolated incidents, but as related factors that can have a significant business impact.

Home values in catastrophe-exposed areas have risen dramatically over the last few decades. Additionally, many industry experts point to climate change as a precursor to continued escalation in catastrophe-driven claim activity. These experts stress the importance of engaging carriers in understanding potential impacts and developing resilience in the face of climate-related risks.¹¹

In short, it is imperative for carriers to understand by-peril and macro-level trends, and determine how such insights can support more precise and profitable pricing. Disciplined, informed underwriting and risk assessment is crucial to responding—and competing—in today’s dynamic and volatile market.

Carriers that rely strictly on their own data may find it difficult to understand their true performance in the marketplace and the potential influence of by-peril trends. On the other hand, by augmenting data with an industry-wide dataset, you can:

Categorized Insights

Generate insights into by-peril history, seasonality and geography that enable you to better select and manage risk.

Pricing

Support more sophisticated pricing at point of quote and renewal.

Performance

Benchmark your performance against the performance of the market.

Identify Opportunities

Identify underserved market segments or opportunities for pricing optimization.

As home insurance carriers continue to be tasked to meet loss-ratio objectives and growth targets, aggregated by-peril data can help you achieve a deeper understanding of the risk associated with a particular location. This, in turn, can help you differentiate your business and help avoid adverse selection as the use of industry-wide data becomes more common. In the long term, aggregated by-peril data can enable more accurate pricing, a healthier book of business and long-term profitability.

Aggregated by-peril data can enable, which one?

More accurate pricing

Long-term profitability

All of the above

Incorrect.

Aggregated by-peril data can enable not only more accurate pricing and a healthier book of business but also long-term profitability.

Back

Correct!

Aggregated by-peril data can enable not only more accurate pricing and a healthier book of business but also long-term profitability.

Back

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Contributors

Contributors

Contributors to this report.

George Hosfield

Senior Director, Home Insurance
LexisNexis^® Risk Solutions

George Hosfield is Senior Director, Home Insurance, at LexisNexis Risk Solutions. In this role, George manages all aspects of the Personal Lines Property Vertical, including overall strategy, profitable growth, new product development and partnerships. He is responsible for a number of industry-leading data solutions, including LexisNexis® Property Data Prefill and LexisNexis® Fire and Disaster Response Score.

George has been with LexisNexis for more than 15 years, working in a variety of operational and strategic roles in both the Legal & Professional and Risk Solutions divisions. He holds a B.A. in English from the University of Virginia and an MBA from the University of Richmond, Robins School of Business.

Prince Kohli

Senior Statistical Modeler, Insurance Analytics
LexisNexis^® Risk Solutions

Prince Kohli is a Senior Statistical Modeler at LexisNexis Risk Solutions. In this role, Prince produces predictive model solutions for Homeowners and Commercial Auto lines.

Prince has more than six years of experience in Personal Auto and Commercial Specialty lines. He is an expert in insurance pricing and reserving. Prior to joining LexisNexis Risk Solutions, Prince held actuary positions at both GEICO and AIG. He is an Associate of the Casualty Actuarial Society and holds an M.S. in Statistics from University of Akron.

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