Homeowners Insurance


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.

A report from the National Insurance Crime Bureau (NICB) has revealed that insurance claims resulting from hailstorm damage in the United States increased by a whopping 84 percent from 2010 to 2012.

In 2010, there were 467,602 hail damage claims filed, but by 2012 that number had jumped to 861,597.

All told, over two million hail damage claims were processed from January 1, 2010 to December 31, 2012, the NICB said.

Perhaps not surprisingly the top five states generating hail damage claims during this period were Texas (320,823); Missouri (138,857); Kansas (126,490); Colorado (118,118) and Oklahoma (114,168).

“Personal Property Homeowners” (PPHO) was the policy type most affected by hail loss claims, with 1.3 million, or 64 percent of the total number of hail loss claims between 2010 and 2012.

On average, PPHO policies were represented more than twice as often as the next most popular policy type, personal automobile.

NICB points out that most of the hail loss claims occurred in the spring and summer months, between March and July, likely due to increased numbers of thunderstorms during this period.

So far, large hail reports posted to NOAA’s National Weather Service Storm Prediction Center site in 2013 appear to show that hailstorm activity is down from 2012. See below:

 

While the NICB report focuses just on hail claims, it’s worth adding that severe thunderstorms in the U.S., including tornadoes, resulted in $14.9 billion in insured losses in 2012, more than $25 billion in insured losses in 2011, and $9.5 billion in insured losses in 2010, according to Munich Re.

In the first-half of 2013, insured losses from thunderstorm events exceeded $6 billion, Munich Re said.

Despite a second consecutive year of historic storm losses in 2012, homeowners insurance customers remain highly satisfied with the property claims experience.

According to the just-released J.D. Power and Associates 2013 Property Claims Satisfaction study, overall satisfaction is 832 (on a 1,000 point scale), down just one point from last year’s study, but up from 823 in 2011 and 818 in 2010.

The study, now in its sixth 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.

In a press release Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, says:

Despite increases in both the frequency and average severity of property damage in the U.S. during the past two years, the fact that customer satisfaction remains high is a testament to how diligently the personal insurance industry has responded to its customers.”

Another key takeaway from the study is that satisfaction with the service interaction process declined by nine points in 2013, compared with 2012.

J.D. Power reports that much of that decline in satisfaction likely is due to the continuing trend of homeowners filing their claim via direct channels – typically online or by calling a call center – rather than through an agent.

Some 68 percent of customers file their recent homeowners claim through direct channels, up from 57 percent in 2012, but satisfaction is 50 points higher among customers who file a claim through their agent, than those who file a claim via direct channels.

The 2013 Property Claims Satisfaction study is based on more than 5,500 responses from homeowners insurance customers who filed a property claim between May 2011 and January 2013.

It was hard to miss the recent Florida story of a sinkhole fatality. This tragic event made news headlines in part because fatalities due to sinkholes are such a rare occurrence.

The story also prompted questions about sinkholes and insurance coverage.

Over at Straight Talk, the Insuring Florida blog, a post by Lynne McChristian explains that Florida has a sinkhole law requiring every property insurer to provide coverage for “catastrophic ground cover collapse”.

This is defined as:

1. Abrupt collapse of the ground cover,
2. A depression in the ground cover clearly visible to the naked eye,
3. Structural damage to the insured building, including the foundation, and
4. The insured structure being condemned and ordered vacated by the governmental agency authorized to do so.

However, a separate optional comprehensive sinkhole policy is needed to cover any other type of sinkhole damage.

Florida is one of only two states that require home insurers to offer sinkhole coverage. The other is Tennessee. In other states most homeowners insurance policies exclude coverage for sinkhole damage.

The Insuring Florida blog has further background info on sinkhole insurance here.

More info on sinkhole claims is in the I.I.I. facts+stats on homeowners and renters insurance.

Now that we’ve had the weekend to absorb Friday’s news of a meteor exploding over Russia’s central Ural mountains, injuring up to 1,200 and causing damage to buildings in six cities, here’s a quick recap of the insurance impact.

According to a report by catastrophe modeler AIR Worldwide, most of the damage was caused by the shock waves as the meteor broke up in the atmosphere. The force of the explosion was enough to shatter dishes, televisions, and windows.

The explosion is estimated to have shattered more than 1 million square feet of glass, AIR Worldwide notes. Preliminary reports suggest more than 3,000 homes and businesses sustained damage from broken glass, including a zinc factory where part of the roof collapsed.

What about the insurance impact?

AIR Worldwide reports that in many countries with developed insurance markets, a comprehensive multi-peril insurance policy generally will cover all risks that are not specifically excluded, meaning that meteorite damage would generally be covered:

The dwelling portion of the homeowner policy is very broad and if damage from falling objects is not listed in the exclusions, it is generally covered.”

CNN cites local officials who say damage from Friday’s explosion could be as much as $33 million.

The Insurance Information Institute (I.I.I.) also reminds us that while the likelihood of actually getting struck by a satellite, a meteor or an asteroid is extremely rare, the good news is that if one of these falling objects does hit you, your home or car or place of business, the resulting damage would be covered by insurance:

Falling objects, including satellites, asteroids, meteors and space debris, are covered under standard homeowners and business insurance policies.”

Good to know, especially as the Russia meteor weighed around 10,000 tons, entered the earth’s atmosphere at a hypersonic speed of at least 54,000 kph (33,000 mph) and shattered into pieces about 30 to 50 kilometers (18 to 32 miles) above the ground.

The Wall Street Journal says that it is the largest reported meteor since one that hit Tunguska, Siberia in 1908, according to the U.S. National Aeronautics and Space Administration.

Customer satisfaction with homeowners insurance companies reached an all-time high in 2012 due to policy bundling, according to an annual study by J.D. Power and Associates.

Its 2012 U.S. National Homeowners Insurance Study found that overall satisfaction with homeowners insurance companies averages 785 in 2012 (on a 1,000-point scale), a 16 point improvement from 2011, and the highest level in the history of the study.

In addition, J.D. Power found customer satisfaction improves by 19 points among customers who bundle their auto and homeowners policies with the same insurer, compared with an improvement of 10 points among customers who have their auto policy with another insurer.

In a press release Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, says:

The increase in satisfaction with policy offerings is directly related to customer perceptions that insurers are doing a better job in offering the right coverage options at competitive prices when policies are bundled.”

The study finds a direct relationship between bundling any additional products and higher customer satisfaction.

Satisfaction among customers who insure only their home with their homeowners insurer is 712. However, when one additional product is bundled (typically an auto policy), satisfaction increases to 792. When four or more products are bundled with the insurer, satisfaction further increases to 861.

Bundling also increases customers’ intent to renew their policy with the same insurer. Among customers who bundle two policies, 46 percent say they “definitely will” renew with their insurer, and this increases to 66 percent when four or more policies are bundled.

The J.D. Power study measures customer satisfaction with homeowners insurance companies by examining five factors: billing and payment; claims; interaction; policy offerings; and price.

In 2012, customer satisfaction is higher in all five factors year over year, with the greatest gains in policy offerings (+35 points) and billing and payment (27 points).

According to J.D. Power, the gains in policy offerings are more pronounced among customers who bundle their auto and homeowners policies than among those who have their auto policy with another insurer: +39 points vs. +25 points, respectively.

The competitiveness of discounts and variety of coverage options are key differentiators among those customers who bundle their insurance, it adds.

The 2012 U.S. National Homeowners Insurance Study is based on responses from more than 12,600 homeowners insurance customers. The study was fielded between May and June 2012.

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

The cost of homeowners insurance claims has been rising rapidly due to increases in claim severity and frequency, and insurers face significant challenges in responding effectively and managing the volatility of catastrophe-related claims, according to a new study from the Insurance Research Council (IRC).

Consumers should also consider steps to control their personal exposure to risk and to mitigate the damages and costs associated with severe weather events, the IRC said.

The IRC study of homeowners insurance claims found that from 1997 to 2011, the average claim payment per insured home countrywide rose 173 percent, from $229 to $626. In 2011 alone, homeowners insurance claim costs per insured home increased 27 percent.

Over the entire 15-year study period, the annualized rate of increase was 7.4 percent.

The IRC examined separately claim trends for claims not related to catastrophic events and those that were related to catastrophic events.

It found that trends in average claim severity (the average claim payment per paid claim) for both groups were similar in some respects.

For both groups of claims, countrywide claim severity increased almost 200 percent and ended the 15-year period in 2011 with similar values—$8,077 for noncatastrophe-related claims and $7,553 for catastrophe-related claims.

Significantly, however, the trend in catastrophe-related claim severity was much more volatile from year-to-year, with dramatic increases and decreases over the study period.

With respect to trends in homeowners claim frequency (the number of paid claims per 100 insured homes), the IRC said these were very different for the two groups of claims over the study period.

The frequency of claims unrelated to catastrophic events fell substantially from 1997 to 2005. Since 2005, however, noncatastrophe-related claim frequency has increased at an annualized rate of 2.9 percent.

Catastrophe-related claim frequency, while much more volatile, remained fairly flat through much of the period.

The study also found that catastrophe-related claims played a significantly greater role in overall claim trends in the second half of the 15-year period. Catastrophe-related claims accounted for 25 percent of overall claim costs countrywide from 1997 to 2004, on average, but 29 percent of overall claim costs from 2004 to 2011.

Check out this PC360 article for more on this story.

Also take a look at I.I.I. facts+statistics on homeowners insurance.

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