Insurers' home insurance exodus – what does it mean for the market?

A recently released study from JD Power highlights the recent insurer exodus trend in several states, indicating potential opportunities for the carriers that persevere while emphasizing the importance of understanding the impact of these decisions on customer perceptions.

Nation-wide, property insurance customers, both homeowners and renters, are facing a challenging situation as insurance providers send notices of termination due to a confluence of catastrophic events, escalating costs, and regulatory pressures that have strained property and casualty (P&C) insurance business models.

The JD Power 2023 US Home Insurance Study evaluates customer satisfaction across two crucial personal insurance product lines: homeowners’ and renters’ insurance. It analyzes five key factors: interaction, policy offerings, price, billing process and policy information, and claims. The study’s insights stem from online interviews conducted with 11,221 homeowners and renters from May to July 2023.

The 2023 US Home Insurance Study offered key insights into these insurer exits, revealing that:

• Overall satisfaction flat as rates start to increase – the overall satisfaction of homeowners remains at 819 (on a 1,000-point scale), the same as in 2022, while renter satisfaction increased marginally. Average filed rate hikes for home insurance have hit double digits each month since February 2023. Nearly half (48%) of homeowners affected by a rate filing witnessed an increase of 5% or more in 2022.
• Statewide pull-outs can negatively affect customer satisfaction and trust – insurers entering states deserted by others face a chance to grow their market share but might struggle to swiftly establish trust and customer satisfaction. Customer satisfaction with homeowners’ insurance is notably higher for those with a tenure of eight years or more. Less-tenured homeowners’ insurance customers exhibit lower satisfaction, decreased renewal likelihood, and diminished advocacy for their current carrier.
• Price sensitivity drives shopping and limits bundling – a significant majority (57%) of homeowners who switched carriers in the past year did so for a better price. This shift in carriers has led to a decline in bundling rates, notably in states where significant carrier exits have occurred.

Based on these insights, Erie Insurance ranks the highest across both homeowners’ and renters’ insurance segments, with a score of 856 and 881, respectively. Amica (844) and Auto-Owners Insurance fill in the second and third spot for homeowners, while American Family (856) and Lemonade (854) nab the same spots for renters.

Breanne Armstrong, director of insurance intelligence at JD Power, highlighted a pattern of nation-wide insurance exits that is affecting homeowners across the country, despite only making the most notable headlines in catastrophe-battered states like California and Florida.

“Insurers are reworking their actuarial maps, confronting state regulations that cap rate increases and struggling with profitability,” Armstrong said. “For customers, this combination of steadily rising rates and sudden abandonment can create irreparable damage to brand loyalty and perceptions of trust. However, it also creates an opportunity for carriers that can come in and absorb these customers. This could be a real make-or-break moment for many carriers.”

In a recent IB Corporate Risk interview, MSCI ESG and climate research senior associate Cody Dong discussed these insurer exits, iterating that there is a lot that the industry can do besides just retreat from riskier markets.

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