Homeowners insurance falls short

October 7, 2002

Study says despite rate and underwriting actions, this market still not earning its cost of capital


Inman News Features

The homeowners insurance industry, despite recent rate and underwriting actions, is not returning its cost of capital, according to a study released by Aon Re Worldwide.

The study's purpose was to quantify the economic status of the market given the considerable rate increases and other underwriting changes that have occurred recently, according to Aon.

The personal lines insurance industry's cost of capital generally ranges from 11 percent to 13 percent, but the homeowners line after considering rate and underwriting actions filed through May/June returned only 4.8 percent on capital, according to the study.

The study showed that homeowners' insurers have made substantial progress from the lowest point in the current homeowners insurance crisis, but concluded that further homeowner rate increases or other underwriting actions may need to be taken by insurers to fully recover the cost of capital.

The study included a review of the rate filings of the top five homeowner's insurers in each state for the states that represent 80 percent of the U.S. population. Aon plans semi-annual updates of the study until this market stabilizes.

Aon Corp. (NYSE: AOC) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. Aon does not write homeowners insurance.

Copyright: Inman News Service


Contact ALTA at 202-296-3671 or communications@alta.org.

SoftPro, based in Raleigh, NC, offers a mature suite of products, designed specifically for the closing and title industry. Our mission is to serve our client base, with best-in-class products and services. Our products are modular so we don't force you to buy anything you don't need. You can always add on as your business grows. Unlike other software companies, we view the sale as the beginning of the relationship rather than the end. North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.