The exterior of a home in Santa Monica, Calif.

Home Insurance Loss Severity Continued Upward Trend in 2021

Home insurance loss costs and loss frequency dipped in 2021, but severity, the financial value of claims, jumped 7% year-over-year, according to the latest LexisNexis U.S. Home Trends Report.

While the one-year drop is positive, the trend of home insurance losses shows a steady increase over the past seven years of data, according to LexisNexis.

“It is very important to provide the [insurance] market with this seven-year data so that carriers will have a more balanced perspective and price risk within the context of long-term trends,” said George Hosfield, senior director of home insurance at LexisNexis Risk Solutions.

In 2021, 95% of catastrophic losses resulted from Hail, Wind, and Weather-Related Water perils. The data underpins that extreme weather events are a major concern for U.S. homeowners and insurers.

Hailstorms in Texas, hurricanes in Louisiana, and fires in California and Colorado contributed the most to catastrophe claims in 2021. Louisiana and Texas experienced the highest loss cost, according to the report.

California’s Risk Profile

When looking at seven-year trends, the Golden State has a mixed risk profile, according to LexisNexis.

California ranked in the bottom five states for wind peril. Unfortunately, the state ranks high for several other risks, including ranking No. 1 for Fire and Lightning peril.

When it comes to wildfires, the long-term upward trend in loss costs “is likely to continue,” according to LexisNexis. The average acreage burned is rising as mega-blazes are becoming more common. Additionally, “fire season” now extends well beyond what was typically a four-month period.

For homeowners, particularly those living in areas categorized as wildland-urban interfaces, the best way to mitigate risk is through “home hardening.” 

When considering other risks, California was third-highest in the nation in loss cost from Thefts in the data period between 2015 and 2021. However, some good news on that front, theft insurance costs have trended downward, likely due to homeowners having access to cheaper monitoring systems.

California was also tops in Liability perils and ranked fourth in Other risks, a category which includes extended coverage, damage to property of others, medical payments, and more.

The liability peril trend continued its downward trajectory, with loss cost decreasing 13% and severity down 23% year-over-year. LexisNexis theorized the decrease could be a continuation from the 2020 pandemic, when there were fewer social interactions and decreased legal system availability.