The five-year period spanning from 2003-2007 served the homeowners insurance line favorably after the dismal 20-year period that preceded it, and return on surplus for the line averaged an estimated 11 percent for those five years.
This five-year period did represent a marked improvement in financial performance for the line, says a report by Conning Research and Consulting.
Yet, the Conning Research study predicts the immediate future for the homeowners insurance line may not be as favorable.
“Looking ahead, the uneasy state of the U.S. economy creates a series of challenges for homeowners insurers over the next several quarters — and likely the next few years,” said Alan Dobbins, analyst at Conning Research and Consulting. “Conditions in the housing market will suppress growth as long as inventories remain at elevated levels and as values decline. Insurance-to-value will be adversely affected, and the threat of inflation could increase the cost of the average homeowners claim in the wake of declining premiums.”
The Conning Research study, “The Homeowners Insurance Market: The Eye of the Storm,” analyzes the economic and regulatory pressures on the line, as well as issues related to catastrophe management and distribution changes that will have profound effects on homeowners insurance in the coming years.
While homeowners insurance distribution has traditional gone the route of independent and exclusive agency channels, conditions are changing, say Conning Research analysts, possibly paving the way for a change in the way homeowners accounts are acquired.
“Changes in technology and in the relative importance of this line to insurers make such a change more likely. Significant challenges for such a shift remain, but the success of various insurers in reconfiguring the distribution function highlights the possibilities of such a shift from traditional methods,” the report said.
“With the increased pressures on the homeowners insurance line associated with both the economy and regulatory issues, it is clear that insurers will need to manage carefully through the next few years,” said Stephan Christiansen, director of research at Conning. “Our research indicates that those insurers who have innovated in technology and are willing to innovate in policy simplification and more sophisticated pricing approaches will be at a significant advantage in this challenging environment.”
Source: Conning Research and Consulting