New Study Shows Rising Costs in Claims for Homeowners Insurance

September 29, 2012
alandaleeditor

Has your homeowners’ insurance rate gone up and will take some more money out of your budget to protect your home? You’re not alone, because rates are rising for everyone. Homeowners insurance claims have been rising in costs very quickly because of the combined effects of the amount of claims reported and the severity of damage that was caused for a claim.

According to the Insurance Research Council, from 1997 to 2011, the average homeowners insurance claim payment per insured home nationally rose 173 percent, from $229 to $626. In 2011, homeowners insurance claim costs per insured home increased 27 percent beyond that. During that entire period overall, the annualized rate of increase was 7.4 percent.

The IRC examined separately individual claims that were and were not related to natural disasters and events then compared the both data collected. The severities of the claims for both groups were also examined. For both groups of claims, the national claim severity increased almost 200 percent and ended the 15-year period in 2011 with similar numbers: $8,077 for non-catastrophe-related claims and $7,553 for catastrophe-related claims.

The homeowner claim report frequency had very different numbers for the two groups of claims over the 15-year study period. The frequency of claims reported that were unrelated to catastrophic events had fallen substantially from 1997 to 2005 because of a variety of factors. Since 2005, however, non-catastrophe-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.

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