Catastrophic Property Claims Hit a Record Forty-Six Percent
Catastrophic property claims hit a record 46%— 2024 LexisNexis® Risk Solutions U.S. Home Trends Report
A staggering 46% of the personal lines property claims in 2023 were catastrophic, a record high over the past seven years. That alarming number is explained in detail in the latest 2024 LexisNexis® Risk Solutions U.S. Home Trends Report.
Notably, 71% of hail claims in 2023 were catastrophic. Wind followed closely at 62%, while fire and lightning made up 14%. The wind-powered fires in southern California are a frightening reminder of the increasing toll of catastrophic weather events on homes and communities.
Our 2024 Home Trends report, the ninth since 2016, analyzes property exposures and losses for a seven-year period and allows us to identify key trends for the home insurance industry. Overarchingly, we found a very concerning trend: Catastrophic claims are rising steadily, with loss costs surging 51.7% since 2019, amounting to billions of dollars in underwriting losses.
The home insurance loss trends are a springboard for action for underwriters, actuaries and territory managers. Relying on limited data points can sometimes create a false sense of security, obscuring the full extent of risk.
The value of long-term data
Our analysis distills three essential metrics: loss cost (average insured losses per exposure), frequency (how often claims occur) and severity (average cost per claim). These insights can create a strategic playbook for your team to better understand how weather events reshape claims and risks across regions and seasons, revealing a landscape of loss that underwriters can no longer ignore.
Here are two crucial metrics your team can consider when making risk and pricing decisions:
• Total peril loss costs increased by 4.1%, with frequency rising 11% from 2022 to 2023.
• Though severity dipped by 6.3% from last year, it remains at 29.8% higher than in 2019.
Having peril-related trend information on hand can help you better assess your book of business within the market context as we get used to the new normal: The unpredictability of weather-related patterns across states and seasons and their impact on catastrophe claims.
Seasonal changes expose additional risks and nuances. Over the past seven years, loss costs and frequency peaked from April to September. Outside these months, lower claim counts mean severity can spike more dramatically when severe events hit. This seasonal awareness can give you an edge, helping you prepare for busy periods and adjust risk strategies.
Climate change, rising costs and increased weather volatility
Our findings affirm that climate change fuels frequent extreme weather. At the same time, inflation drives up repair costs—the pressures on home insurance are unprecedented when we look back over broader historical data.
While hail claims are spiking, the frequency of wind claims increased 14.8% from 2022 to 2023. Analyses show a growth trend for those claims, even where non-catastrophic weather events are happening more often. These findings suggest that underwriters may need to adapt quickly. Severe weather is no longer a rare anomaly; robust, climate-adjusted models and real-time insights are crucial.
Catastrophes increasingly volatile
Severe weather's impact is no longer uniform; it's intensely volatile, with catastrophic costs hitting some states harder than others. Colorado leads in loss costs from devastating events, while Hawaii's average claim severity soared above all other states in 2023, largely due to wind-driven wildfires that destroyed over 3,000 homes -- the same that has happened in California.
Hail is a significant peril in central and western states, notably in the "hail alley" of Colorado, Nebraska, Wyoming and Texas. In 2023, the U.S. recorded 6,962 hail events, with 71% classified as catastrophic, as we’ve seen, highlighting its substantial financial impact in this region. These extremes signal that underwriters can no longer rely on one-size-fits-all models.
Positive signs not enough to change long-term cautious outlook
While rising catastrophe costs capture the spotlight, our report reveals some positive signs in certain areas. Loss costs for weather-related water perils decreased by 51.4% in 2023 in comparison to 2022. Non-weather-related water costs shrunk 11.2%. Liability claims have remained relatively stable in the same period. These declines suggest that targeted prevention and mitigation efforts, like improved plumbing technologies, are helping to lower non-weather-related peril water losses.
We should caution that broader risks persist despite several positive trends. Severity remains high for critical perils like wind and hail. At the same time, catastrophic fire claims still account for 14% of losses, doubling from 7% in 2022.
Data has the power to change the world
The mixed insurance landscape reminds us of the importance of a balanced, data-driven approach that builds on areas of stability while staying vigilant against volatility in climate-sensitive, high-cost perils.
Inflation and rising repair costs push insurers to adapt before the next storm hits. By tracking detailed data on each home and understanding specific risks, carriers can respond faster to unpredictable changes. As some states approve rate increases, insurers must know where to take on new business. The key is finding those areas that balance risk and reward in today's changing market.
Ready to abandon outdated models and leverage real-time intelligence? Download our latest LexisNexis Risk Solutions U.S. Home Trends Report.