Homeowners Insurance


Much hay is being made of an apparent decline in the number of identity theft victims and losses, amid an ongoing number of significant data breaches.

The headlines follow release of the 2015 Identity Fraud Study by Javelin Strategy & Research. The study found that there were 12.7 million identity fraud victims in 2014, down 3 percent from the near record high of 13.1 million victims in 2013.

At the same time, some $16 billion was stolen from fraud victims in 2014, an 11 percent decline from $18 billion in 2013. Javelin attributes the decrease to the combined efforts of industry, consumers and monitoring and protection systems that are catching fraud more quickly.

As we know, 2014 saw a number of major data breaches, notably from retailers Home Depot, Neiman Marcus, Staples and Michael’s as well as financial institutions such as JP Morgan Chase.

But lest you think that the swift response to data breaches has nullified the identity theft threat, think again.

Javelin found that two-thirds of identity fraud victims in 2014 had previously received a data breach notification in the same year. Also, individuals whose credit or debit cards were breached in the past year were nearly three times more likely to be an identity fraud victim.

Meanwhile, identity theft just topped the Federal Trade Commission’s (FTC) national ranking of consumer complaints for the third consecutive year, accounting for 13 percent of all complaints.

Government documents/benefits fraud (39 percent) was the most common form of reported identity theft, followed by credit card fraud (17 percent), phone or utilities fraud (13 percent), and bank fraud (8 percent), the FTC said.

Whether or not identity theft is caused by a data breach (remember, stolen laptops, wallets, dumpster diving, phishing scams are some of the most common causes of identity theft), or whether an individual even knows how their information was compromised (many don’t), it’s important to stay vigilant to this threat.

A 3 percent decline in identity fraud victims in one year isn’t much. As Al Pascual, director of fraud & security at Javelin notes:

Despite the headlines, the occurrence of identity fraud hasn’t changed much over the past year, and it is still a significant problem.”

Wondering if your homeowners insurance policy includes coverage for identity theft? Check out these useful tips from the I.I.I.

Overall satisfaction among homeowners who have filed a property insurance claim increased for the third consecutive year, according to the JD Power 2015 Property Claims Satisfaction Study.

Insurers have been able to increase property claims satisfaction to 851 (on a 1,000 point scale) in 2015, up from 840 in 2014.

JD Power said the higher satisfaction among customers reflected the fact that insurers have applied the lessons learned while handling CAT claims to non-CAT claims and put renewed focus on their property insurance business.

In the words of Jeremy Bowler, senior director of the insurance practice at JD Power:

The study shows the significant gains insurers have made in customer satisfaction by applying the lessons learned while handling prior catastrophic losses to all claim processes.

The big storms masked the steady progress the industry has also been making in recent years on routine claims, but we’re really seeing that shine now.”

The study, now in its eighth year, measures satisfaction with the property claims experience among insurance customers who have filed a claim for damages by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

Overall satisfaction improved in each of the five factors in 2015, with greatest year-over-year improvements seen in settlement and service interaction, JD Power noted.

The study findings are good news for insurers as they often realize a return on their investment in customer satisfaction in the form of loyalty.

Only 3 percent of customers who were delighted (satisfaction scores 900 or higher) and 7 percent of those who were pleased (scores 750-899) with their insurer during the claims process have switched carriers since their claim closed, according to JD Power.

But, 9 percent of indifferent (scores 550-749) and 11 percent of displeased (scores 549 or lower) customers have switched to a different insurer. And 23 percent of indifferent customers and 42 percent of displeased customers say they will shop for a new provider during the next 12 months.

The study is based on more than 6,100 responses from homeowners insurance customers who filed a property claim between January 2013 and December 2014.

Check out this I.I.I. video for steps for filing a homeowners claim.

The cost of claims paid by homeowners insurers has been increasing at twice the rate of inflation, despite significant declines in recent years, according to the 2015 edition of a report from the Insurance Research Council (IRC).

Average homeowners claims payments per insured home have been increasing at an annualized rate of 5.0 percent since 1997, the IRC said, compared to the inflation average of approximately 2.4 percent.

Volatility—a major characteristic of homeowners insurance claims trends—is reflected in this chart:

IRCHomeownersClaimsSeverity

The average claim payment per insured home countrywide rose to $625 in 2011, up from $229 in 1997, before falling to $442 in 2013.

What’s behind the increased costs?

All of the increase in average costs per insured home was due to growth in average claim severity, which rose at an annualized rate of 7.8 percent over the 17-year period—more than triple the rate of inflation, the IRC said.

The rise in claim severity more than offset a 2.6 percent annualized decrease in claim frequency, the report found.

That said, claim frequency trends were found to be significantly more volatile than claim severity trends, especially for experience identified by insurance companies as related to catastrophe events.

In the words of Elizabeth Sprinkel, senior vice president of the IRC:

Insurance companies face significant challenges in responding effectively to rapid growth in claim severity and in managing the extreme volatility of claim trends everywhere.

In addition, consumers will find it increasingly important to consider steps to control their personal exposure to risk and to mitigate the damages and costs associated with severe weather events.”

IRC analyzed data from the Fast Track Monitoring Service representing approximately 50 percent of the U.S. homeowners insurance market for the study.

I.I.I. has useful facts and statistics on homeowners insurance here.

My own Valentine’s story is one of loss and finding, and how insurance helped.

Last April I lost my engagement ring. One minute it was on my finger, the next it wasn’t.

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It was late in the day when I felt the weightlessness of my fourth finger. The day had been full of preschool dropoffs and pickups, a grocery store run, a bank drive-thru, multiple loads of laundry, a music class and playtime with my youngest son.

Frantic, I retraced my steps, searched on my hands and knees every inch of the family room, fingered through laundry fresh and dirty, drove back to the bank, called the grocery store. Nothing.

The knowledge that the ring had become loose on my finger in recent months didn’t help. It could have slipped off anywhere.

My partner arrived home to find me a mess. When we got engaged back in 2004 the diamond rings we picked out at a well-known Fifth Avenue store were a significant purchase for us, but not excessive by any means.

Still, to lose the ring just a year shy of our 10th wedding anniversary gave me that ball in the pit of my stomach feeling. I emailed our insurance agent.

The next morning I broadened my search, retracing steps over the prior weekend. On my second empty-handed trip back from the bank drive-thru I followed our agent’s advice and called our insurer to report the loss.

Retelling what had happened to the customer service rep was cathartic actually. She asked for details: When did I last remember seeing the ring? Which bank drive-thru had I visited? How long had the ring been loose? When exactly had the ring been purchased? Had it been valued?

Luckily, we had filed away the valuation reports and diamond certificate given to us at the time of purchase. On re-reading, these words jumped out:

I have also included two copies of a valuation report which details the replacement value of your merchandise. One copy is provided for your personal records, the other may be supplied to your insurance company to protect you in the event of loss or damage.”

The report filed with our insurer, I was somewhat comforted by the fact that our standard homeowners policy covers our personal belongings, including jewelry up to a stated dollar amount (in our case just more than the value of the ring). Our decision to go for replacement cost coverage also proved prudent.

A day later I got a call from the insurer that the appraisal department had reviewed my case and a check would be issued to make good my loss. I thanked the rep for her efficiency, adding: “I’ll still keep looking for the ring.”

It was four or five days after the ring went missing that a strange thing happened. My eldest son was jumping up and down on the couch. Anyone with young boys knows they do this often.

Suddenly something round and glittering fell out from under it. My son picked it up and handed me none other than my engagement ring!

I don’t know who was more pleased, me or the customer service rep at our insurer. The insurance check (already in the mail) was cancelled. The original ring was back on my finger.

Soon afterwards on the advice of our insurer, we went back to the jeweler to get my ring re-sized. After 10 years, one dog and two kids the net reduction was 1.5 sizes.

Our modest jewelry loss ended in the best possible way, but if you own valuable jewelry or other items that would be difficult to replace, you might want to increase your coverage, as the I.I.I. advises here.

And remember, as the years go by it’s a good idea to get your jewelry resized if you want to hold on to the sentimental value.

With thanks to MetLife and Tiffany & Co.

Happy Valentine’s Day to all our readers!

As you prepare to welcome a throng of Frozen Elsas and Olafs to your front door, you may not be thinking about insurance but we’re here to tell you, you’re covered.

The Insurance Information Institute (I.I.I.) points out that standard homeowners and renters insurance will provide coverage for the following:

Vandalism: In the event your home or your personal possessions are damaged by neighborhood tricksters, homeowners and renters insurance policies provide coverage for vandalism and malicious mischief. You are on your own, however, when it comes to removing the toilet paper from your front yard….

Fire: If a jack-o-lantern, or other decoration, goes up in flames and damages your property, your homeowners or renters policy will cover fire-related losses. And, should the blaze make your home uninhabitable, additional living expenses (ALE) coverage will pay for alternate accommodations, such as a hotel, while your home is being repaired.

Injuries: The liability portion of a homeowners or renters policy comes into play if a Halloween party guest, or a trick-or-treater is injured while at your house or apartment. These policies also include no-fault medical coverage so the injured person can file their claim directly with your insurer. And if Fido gets a little skittish from all the commotion and accidently nips a trick-or-treater your liability coverage includes damages or injuries caused by pets.

Have a safe and happy Halloween!

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Just in time for the peak of hurricane season, our updated paper on the residual property market is hot off the press.

At first glance the numbers on the property insurance provided by the nation’s FAIR and Beach and Windstorm plans indicate that attempts by certain states to reduce the size of their plans appear to be paying off.

As you’ll see, the exposure value of the residual property market in hurricane-exposed states has declined significantly from the peak levels seen in 2011. In fact between 2011 and 2013, total exposure to loss in the plans fell by almost 30 percent – from $885 billion to $639 billion.

Why such a drop?

Florida Citizens, a plan that accounts for more than half (51 percent) of the total FAIR Plans’ exposure to loss, saw its exposure drop by nearly 50 percent from $429.4 billion in 2012 to $228.9 billion in 2013, as Citizens took much-needed steps to reduce its size.

This accounted for the overall reduction in total exposure under the FAIR plans. In 2013 total exposure to loss in the FAIR Plans was $445.6 billion, a 38 percent drop from its 2011 peak of $715.3 billion.

But what of the Beach and Windstorm plans?

Latest data show that between 2011 and 2013 exposure to loss in the Beach and Windstorm Plans actually grew by 14 percent.

Five state Beach and Windstorm plans are covered in our report: Alabama, Mississippi, North Carolina, South Carolina and Texas.

Over a longer time period, 2005 to 2013, the I.I.I. finds that some of the Beach and Windstorm plans saw accelerating growth. For example, total exposure to loss in the Texas Beach Plan (the Texas Windstorm Insurance Association (TWIA)) increased by 230 percent during this period.

A plan that would move TWIA’s policies over to private insurers and depopulate its book of business (much like Florida Citizens has done) is in the works, but so far nothing definite.

An ongoing and arguably more pressing concern is the fact that many of the residual market plans charge rates that are not actuarially sound and do not accurately reflect the risk of loss.

What does this mean? The I.I.I. warns that a major hurricane could expose residents in certain states to billions of dollars in post-storm assessments:

While hurricane activity in the most exposed states may have been lower in recent years, there is no question that over the long-term major hurricanes will cause extensive damage in future. This highlights how important it is for the rates charged by these plans to be actuarially sound.”

Overall satisfaction among homeowners insurance customers who filed a property claim has improved for the second consecutive year.

According to the J.D. Power 2014 Property Claims Satisfaction Study, satisfaction among homeowners insurance customers who filed a property claim between April 2012 and January 2014 averages 840 (on a 1,000-point scale) – up from 836 in the 2013 study.

Overall satisfaction with non-catastrophic claims increased by 11 index points in 2014, compared with 2013 (843 vs. 832, respectively).

However, satisfaction among those homeowners who filed a claim for damage caused by Superstorm Sandy averages just 830 in 2014, down from 846 among Sandy-related claimants surveyed shortly after the October 2012 storm.

At this point, we should note that Sandy caused $18.75 billion in insured property losses across 15 states and the District of Columbia, not including National Flood Insurance Program (NFIP) losses, according to Property Claim Services (PCS). This makes it the third costliest U.S. hurricane topped only by Hurricane Katrina in 2005 and Hurricane Andrew in 1992.

Returning to J.D. Power’s findings it’s not surprising to learn that communication and timeliness are key to keeping homeowners insurance customers satisfied during the property claims process.

A press release quotes Jeremy Bowler, senior director of the insurance practice at J.D. Power:

Starting at the time of first notice of loss, it is crucial for insurers to keep claimants informed of their claim, the estimate of damages, the settlement amount, when work will begin and when it will be completed.”

The study, now in its seventh year, measures satisfaction with the property claims experience among insurance customers who filed a claim for damages covered under their homeowners’ policy by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

The 2014 Property Claims Satisfaction Study is based on more than 5,500 responses from homeowners insurance customers who filed a property claim between April 2012 and January 2014.

We’re not football people, so the fact that the Super Bowl is happening in our back yard in New Jersey in early February, hasn’t registered yet.

However, the Insurance Information Institute (I.I.I.) just issued a press release that got us thinking, not just about touchdowns and field goals.

Before we look into renting out our house to Super Bowl fans, the I.I.I. cautions us and other like-minded homeowners to first contact our insurer to make sure we’re covered if our property is damaged or if someone is injured.

Apparently the market for properties near the Stadium in East Rutherford, New Jersey, eight miles west of mid-town Manhattan, is booming on peer-to-peer rental websites. Short-term rental prices for homes typically soar when the Super Bowl or other high-profile sporting events come to town.

So how do insurers approach this home-sharing scenario?

According to the I.I.I., some insurers may allow policyholders to use their property as a rental for a one-time, special occasion like the Super Bowl, as long as the insurer is informed about it ahead of time.

Other insurers, while allowing this type of arrangement, may insist on other criteria being met, such as the homeowner acquiring additional insurance coverage.

Some insurers, though, will consider any rental of your home to be a business venture, requiring the purchase of a business policy–specifically either a hotel or a bed and breakfast policy—because a standard homeowners insurance policy excludes losses arising from the operation of a business.

In the words of Jeanne Salvatore, senior vice president, Public Affairs, and consumer spokesperson for the I.I.I.:

Technological advances have allowed for the growth of the sharing economy. But, if you participate, it is your responsibility as a property owner to make sure you’re adequately covered.”

Check out I.I.I. information on the sharing economy and homeowners insurance.

Homeowners insurance customers are more satisfied with the property claims experience overall, according to the J.D. Power 2014 Property Claims Satisfaction Study – Wave 2.

Overall claimant satisfaction increased to 848 (on a 1,000-point scale) in Wave 2 of the study, up from 832 in Wave 1.

J.D. Power says the improvement is due to insurers providing accurate timelines of the claims process length and helping claimants avoid settlement negotiations.

In a press release, Jeremy Bowler, senior director of the global insurance practice at J.D. Power, said:

Insurers are doing a better job of setting claimant expectations of the time it will take to settle their claim, which is a significant contributor to overall satisfaction. Based on feedback from claimants, it is evident that insurers also are more consistently taking time to explain the settlement, which results in fewer claimants negotiating their settlement.”

Higher levels of satisfaction were buoyed by improvements in the handling of first-time claimants and non-catastrophic claims, the study found.

Satisfaction among first-time claimants improved by 17 points to 842 in Wave 2, from 825 in Wave 1, as more insurers provided an accurate timeline of the claims process length (76 percent in Wave 2, versus 72 percent in Wave 1) and a greater percentage of claimants avoided a settlement negotiation (75 percent did not have to negotiate the settlement in Wave 2, versus 71 percent in Wave 1).

Satisfaction with non-catastrophic damage claims also increased to 840 from 829 in the 2013 study, and 833 in the 2012 study. This was due to significantly higher scores in the estimation process, repair process and settlement factors, J.D. Power said.

Interestingly, satisfaction with agent first notice of loss dropped to 853, from 875 in Wave 1. Customer satisfaction when reporting claims via a call center, website or other electronic method increased, however (up to 855 in Wave 2 from 829 in Wave 1).

The study measures satisfaction with the property claims experience among insurance customers who filed a claim for damages covered under their homeowners policy by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

Wave 2 of the study is based on responses from 1,740 homeowners insurance customers who filed a property claim after June 1, 2012. The current wave of the 2014 study was fielded in the third quarter of 2013.

U.S. homeowners insurance offers significant growth opportunities for personal lines insurers, as positive rate momentum is improving the outlook for many states, according to the Aon Benfield Homeowners ROE Outlook 2013 update.

The study reveals strong growth in the homeowners line between 2009 and 2012, with direct written premiums increasing 15 percent countrywide. Only Nevada saw a decline in premium volumes, as written premiums decreased by 1.5 percent during the period.

By comparison, personal auto direct written premium growth was only 6.5 percent during the period.

The report concludes that insurers’ prospective after-tax return-on-equity (ROE) for homeowners insurance is 4.6 percent on a countrywide average, and 8.0 percent excluding Florida.

While the countrywide outlook is essentially flat relative to last year’s 4.7 percent estimate, at the state level, positive rate momentum is improving the outlook for many states, according to Aon Benfield.

Some 36 states have prospective ROE outlooks better than the 8 percent average, and 28 states have prospective ROE outlooks 12 percent or greater.

Positive rate momentum has been evident, as approved rate changes in homeowners lines have averaged a 7.7 percent increase across the U.S. over the past 18 months, the report finds.

Gulf states achieved some of the highest average rate increases, particularly Texas, where rates increased 12.6 percent, while the hurricane-exposed state of Florida average rate increase was 8.2 percent.

A press release cites Parr Schoolman, Aon Benfield Global Risk and Capital Strategy Team Leader:

Overall, the homeowners line of business is still not producing adequate returns for the industry, but given the recent rate and underwriting actions, for the first time we are seeing an improving outlook for many states, especially in non-coastal regions. Although more can still be done in terms of pricing segmentation, capturing the cost of catastrophe risk in rate filings is becoming a more widespread practice within the industry, which is a positive for the long term prospects in this line of business.”

Check out I.I.I. facts and statistics on homeowners insurance.

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