How to Make Sense of a Chaotic Homeowners Insurance Market

Chaotic Homeowners Insurance Market

The “supercell” thunderstorms that occurred in the Midwest and South earlier this year have complicated an already disrupted homeowners market. As agents and brokers are undoubtedly aware, homeowners insurance is now in a state of flux. Rates are on the rise across the United States. Yet, for many standard market carriers rates are too low for homeowners insurance to be profitable. Property coverage has been particularly difficult, and many carriers are taking steps to limit their exposure.

There are three key reasons why homeowners insurance has become a money-losing proposition for many standard market insurers:

  • Competition: Numerous insurers offer homeowners coverage, and consumers can have difficulty distinguishing one insurer’s policy from another. With many insurers wooing the same pool of customers, competition has been fierce. Rival insurers have driven down prices. Once prices are reduced, they can be difficult to increase in some markets due to regulation.
  • Weather: Within the last year, the United States has experienced “superstorm” Sandy in the East; Hurricane Isaac in the Gulf States; and severe thunderstorms, hail storms and tornadoes in the Midwest and South. Weather has also been a contributing factor in a number of firestorms that have taken place in the West. In combination, these weather events have generated billions of dollars in property losses for homeowner insurers.
  • The Economy: Homeowner claims tend to rise when the economy sours – and economic conditions were especially bad during the most recent recession. Moreover, many consumers defer home maintenance when money is tight and poorly maintained homes are prone to losses. Finally, rising construction costs have adversely affected the homeowners market. Both materials and labor have become more expensive, forcing insurers to pay more to repair or replace damaged property. The rising costs have resulted in larger property claims.

Standard insurance carriers are looking for ways to de-emphasize property in favor of coverages that have higher profit margins. Insurers are using a variety of techniques to limit their exposure to property losses such as:

Exiting the homeowners market entirely, particularly in high-risk areas.

  • Refusing to write homeowners policies without supporting business, such as a personal auto policy.
  • Raising deductibles or paring back coverage by adding restrictions or exclusions.
  • Not renewing large numbers of policies, leaving agents scrambling to find alternate markets.

When a client’s homeowners policy is canceled or not renewed by a standard insurance carrier, the broker or agent risks losing that client. Burns & Wilcox has the expertise and exclusive access to markets that can offset the dwindling options and limitations of today’s standard insurers.

Instead of avoiding clients with hard-to-place risks, Burns & Wilcox uses its connections to find solutions for everything from coastal property and vacation homes to rental properties and monoline property. Consequently, you can turn a turbulent homeowners insurance market into an opportunity to retain your current clients while gaining new ones as well.