Category Archives: Homeowners Insurance

Despite Storms, Property Claims Satisfaction Remains High

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.

Sinkholes and Insurance

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.

Meteors and 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.

Policy Bundling Drives Customer Satisfaction with Homeowners Insurance

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.

IRC: Rapid Rise in Homeowners Claim Costs

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.

California Wildfire Risk Analysis County-by-County

More than two million California homes face extreme wildfire hazards and many of these homes are located in densely populated suburban neighborhoods, according to new industry research.

Analysis by the Insurance Information Network of California  (IINC) and Verisk Insurance Solutions – Underwriting, reveals that the majority of these high-risk homes are located in Southern California, though Northern California has a higher percentage of high risk homes.

Candysse Miller, executive director of IINC, says:

Nearly 15 percent of the 13.5 million homes in California face severe wildfire risk. That’s nearly as many homes as are in the entire state of Colorado. Wildfire risk is not exclusive to mountain or rural communities. Many of these homes are in densely-populated suburban neighborhoods.†

More than 417,000 of these high-risk homes are located in Los Angeles County and Southern California counties represent 53 percent of the high-risk homes statewide, the study found.

However, Northern California has a higher percentage of high-risk homes. The counties of Alpine, Mariposa, Tuolumne and Nevada account for more than 95,000 homes, but more than 77 percent of these, or nearly 74,000, are considered high-risk.

Statewide, insurers protected more than $3 trillion of residential property in 2011, according to the California Department of Insurance, less than 1.25 percent of which was insured by the California FAIR Plan, the state’s insurer of last resort. As a result, private insurers cover nearly 99 percent of the insured residential properties in the state.

For a county-by-county view of  California’s wildfire risk, check out this interactive map on the IINC website.

More facts and statistics on wildfires available here.

Lightning Claims Analysis

Every year lightning strikes the ground 30 million times and injures about a thousand people in the United States, according to the Lightning Protection Institute (LPI).

As next week is Lightning Safety Awareness Week, here’s a recap by the numbers of this underrated weather hazard and cause of property damage, courtesy of the Insurance Information Institute (I.I.I.).

Note to readers: numbers are based on an analysis of homeowners insurance data by the I.I.I. and State Farm:

186,000: The number of lightning claims paid out by homeowners insurers in 2011. Losses ranged from damage to expensive electronic equipment to structural fires that destroyed entire homes.

$5,112: The average cost of a lighting claim in 2011, up 5.5 percent from 2010.

93%: The increase in the average cost per claim from 2004-2011, even as the actual number of paid claims fell by over 33 percent over the seven-year period. This decline may be due to increased use of lightning protection systems.

Loretta Worters, vice president of the I.I.I., sums up the findings:

The number of paid claims is down, but the average cost per claim continues to rise, in part because of the huge increase in the number and value of consumer electronics in homes. Plasma and high-definition television sets, home entertainment centers, multiple computer households, smart phones, gaming systems and other expensive devices—which can all be destroyed by power surges—continue to have a significant impact on claims losses.†

With this in mind, it’s good to know that damage caused by lightning, such as fire, is covered by standard homeowners and business insurance policies. Some home and business insurance policies provide coverage for power surges that are a direct result of lightning striking a home or business, according to the I.I.I.

There is also coverage for lightning damage under the comprehensive portion of an auto insurance policy.

Check out more I.I.I. facts and statistics on lightning here.

Dog Bite Liability: Are You Covered?

Many dog owners do not consider the possibility that their friendly Fido could bite a friend, relative, or even a stranger. But dog bites do happen and irresponsible dog owners endanger others and their assets, according to the Insurance Information Institute (I.I.I.)

For example, State Farm, the largest writer of homeowners insurance in the U.S., paid out more than $109 million as a result of its nearly 3,800 dog bite claims in 2011.

The I.I.I. reports that dog bites accounted for more than one-third of all homeowners insurance liability claim dollars paid out in 2011, costing nearly $479 million.

An analysis of homeowners insurance data by the I.I.I. found that the average cost  paid out to  dog bite claims was $29,396 in 2011, up 12.3 percent from $26,166 in 2010. In fact, from 2003 to 2011, the cost of the average dog bite claim increased by 53.4 percent.

These increases can be attributed to higher medical costs as well as the size of settlements, judgments, and jury awards given to plaintiffs, which have risen well above the rate of inflation in recent years, according to the I.I.I.

Most standard homeowners insurance policies provide policyholders with anywhere from $100,000 to $300,000 in dog bite liability coverage. If the claim exceeds those limits, the dog owner is personally responsible for all damages above that amount, including legal expenses.

Most insurers will cover homeowners with dogs. However, once a dog has bitten someone, your insurance company may charge a higher premium or exclude the dog from coverage.

Of course, the best way to protect yourself is to prevent your dog from biting anyone in the first place.

Check out this I.I.I. video for tips on preventing dog bites:

Next week is National Dog Bite Prevention Week so now is a good time to review tips on how to be a responsible dog owner.

Homeowners Insurance: Customer Satisfaction Increases

As 2012 appears to be continuing the trend of heavy thunderstorm losses (hail and tornadoes) seen in 2011, the just-released 2012 U.S. Property Claims Satisfaction Study from J.D. Power and Associates makes for a timely read.

The study, which measures customer claims experiences based on homeowners claims filed during 2011, found that overall satisfaction in 2012 improves to 833 on a 1,000-point scale, an increase of 10 points from last year’s study.

The improvement comes despite the record number of storm losses seen in 2011, when there were 99 weather-related disasters in the U.S., 14 of which totaled more than $1 billion in damages each, according to the Insurance Information Institute (I.I.I.).

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

A period of tremendous volatility in the industry, caused by a large number of devastating storms, led us to anticipate that satisfaction would decline, but that clearly was not the case.†

And:

The industry as a whole did well in not only handling the day-to-day claims, but also the large volume of claims associated with those major events.†

Other key takeaways from the study, include the fact that high wind claims, which include tornado and hurricane damage, accounted for 33 percent of all claims filed, an increase from 21 percent in last year’s study.

Yet, among those who filed a claim for high wind damage, satisfaction remained stable, relatively unchanged with last year.

Claims experience by region shows mixed results, however. For example, satisfaction in the South Atlantic and Northeast regions, both of which had increase in high wind claims due to hurricanes in 2011, improved 36 points and 18 points respectively on the prior year’s study.

In contrast, overall satisfaction the East North Central Region, which also had an increase in high wind claims due to tornado damage, satisfaction declined by 14 points. The West South Central region which saw an increase in hail-related claims also saw an eight-point drop in satisfaction year over year.

Not surprisingly, the study finds that a positive claims experience fosters significantly higher long-term loyalty among claimants, while a negative claims experience may cause claimants to be more likely to switch insurers.

Check out I.I.I. facts and statistics on homeowners insurance and tips on how to file a homeowners claim.

Texas Tornadoes and Hail

As well as strong winds and heavy rains, hail – ranging from pea to baseball size – was a feature of the massive tornadoes that touched down in the Dallas Fort Worth area yesterday.

Specifically, the Dallas-Fort Worth international airport reported that more than 100 aircraft were damaged by hail, according to CNN.

Hail causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA).

Pea size hail measures an estimated  ¼ inch in diameter, while baseball size hail would measure about 2  ¾ inches.

The Insurance Information Institute (I.I.I.) reminds us that hail damage is covered under standard homeowners insurance. It is also covered under your auto policy provided you have comprehensive coverage.

Some insurers may have special deductibles in hail prone areas, to help keep insurance premiums at affordable levels.

Physical damage to aircraft as a result of hail would be covered under a hull insurance policy.

The I.I.I. reports there were over 9,000 major hail storms in 2010, according to statistics from NOAA’s Severe Storms database. Texas had the largest number of severe hail events in 2010, followed by Kansas, Missouri, Nebraska and Oklahoma.

Learn  how  to protect your home from hail in this I.I.I. video: