Homeowners Loss Data

Using the most recent Industry loss data for six Southern states and nationwide, we have reviewed the Homeowner loss experience on a rolling four quarter basis excluding catastrophe losses. 

OVERVIEW

Bad economic conditions are accelerating loss trends overall.  In Florida, Louisiana, Mississippi, and South Carolina, the average paid loss per policy in force is continuing to trend upward while Alabama appears to be leveling off.  Georgia, however, is improving.

Chart 1

FLORIDA

When we looked at the relative change since the 4th quarter of 2006, we found that the loss trend in Florida is extreme compared to the other Southern states.  Florida non-catastrophe costs have doubled in four years while costs in the other states and nationwide are 37% to 62% higher.

Chart 2

FREQUENCY OR SEVERITY?

We believe that, if the state economies stay in the current malaise for an extended time, we will see the other states start a new upward trend.  This leads to the question: What is driving this change, frequency or severity?

Here is the loss frequency, the number of claims for every 100 policies:

Chart 3

And, the relative change in frequency:

Cahrt 4

There is a definite upward trend visible in the top graph.  Note that Alabama and Louisiana are at about the same level now as 2006.  It should be noted that Louisiana’s data has some bias in 2008 due to leakage of a large catastrophe event into the non-catastrophe data.  We expect that Alabama will see a bump as well in 2011-2012 due to the tornado losses in April.  Since the end of 2007, South Carolina has deteriorated quickly.

When we examine severity — the average dollars paid on each claim — Florida again has results well above average, and the other states are grouped within a limited range.

Chart 5

Here is the relative change since 2006 in severity:

 

Overall, the deflationary effects of the recession have kept loss inflation in a reasonable range for these states and countrywide — less than 7% annual trend. 

Let us know what you think: What is driving the trends in Florida?  Why is the average paid loss per policy in force getting worse in some states and improving in others?  Do third-party influences like public adjusters impact loss trends (positively or negatively)?  Why has the loss situation in South Carolina deteriorated quickly in the past four years?

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