The 13 largest homeowner insurers rejected nearly half of the claims last year

He’s probably trying to compensate the rising costs of climate changethe nation’s 13 largest homeowners insurers denied 47.5 percent of their claims last year, compared with 37.4 percent for all reporting insurers, a study from Weiss Ratings found.

Several factors can lead to a claim being rejected, including certain risks such as floods and wind storms not being covered by standard policies.

But for Martin Weiss, founder of Weiss Ratings, there is more to the story.

“Instead of maintaining adequate reserves to cover potential damage from storms, floods and wildfires, many insurers are distributing funds to shareholders or moving them to other subsidiaries,” Weiss said in a news release. “Now, to make ends meet, these companies close about half of homeowners’ claims without any payment.”

This is just another level of problems on the growing problem, if homeowners can get this coverage at a time when its costs are rising.

A recent Matic survey of mortgage lenders found that 63% of those who reported that at least one borrower they had worked with recently had trouble securing home insurance. Among the common problems was the borrower’s debt-to-income ratio becoming too high once the cost of insurance was factored in.

In May, Fannie Mae and Freddie Mac published a joint blog post explaining why they need a cost value replacement policy rather than the less expensive true cost value coverage.

The insurer with the highest claims rejection rate according to Weiss is Farm Bureau Property & Casualty Insurance Co., with 70.5% of 2023 claims closed without payment. That’s much higher than No. 2 American Bankers Insurance Co. from Florida, with 51.2%.

Weiss analyzed National Association of Insurance Commissioners data on all homeowner and farm owner claims filed and closed last year, according to each company’s filings with regulators.

The 13 listed companies handled nearly 3.9 million claims during 2023; all reporting insurers had 8.8 million claims closed.

Weiss said high refusal rates are not normal.

“They have been rising steadily for nearly two decades and have now reached alarming levels, particularly among some of the largest providers in disaster-prone states like Florida and California,” Weiss said.

“The public cannot even begin to face the property insurance crisis until both the industry and their regulators provide full transparency, a change in standard operating procedure that may not be possible without strong legislation” The Truth in insurance”.

Zillow now includes climate risk data from First Street on its listings of properties for sale. A September 2023 survey by the company found that more than 80 percent of homebuyers look at climate risks while shopping for a new place to live.

“Healthy markets are ones where buyers and sellers have access to all the data relevant to their decisions,” said Skylar Olsen, chief economist at Zillow, in a press release. “As concerns about flooding, extreme temperatures and bushfires grow – and what could means for future insurance costs — this tool also helps agents inform their clients in discussions about climate risk, insurance and long-term affordability.”

Insurers have pulled out of climate-prone markets altogether if they haven’t renewed their policies, so it’s becoming increasingly difficult for buyers to secure essential coverage, said Travis Hodges, managing director at the brokerage insurance VIU by HUB.

“Choosing to forego insurance coverage also increases mortgage underwriting risk significantly, leaving lenders vulnerable to substantial financial loss in the event of property damage or liability claims,” ​​Hodges said. “The one the absence of adequate insurance it not only increases the likelihood of default and foreclosure, but also causes lenders and insurers to reassess their risk exposure.”

It could lead to tighter lending standards, along with the imposition of higher premiums on borrowers, to reflect the evolving risk landscape and the imperative to protect financial interests, Hodges continued.

“It is critical that we increase communication and collaboration between insurers, borrowers and lenders,” added Hodges. “By doing this, we can ensure a thorough risk assessment and directly address the negative consequences of underinsurance in the mortgage market.”

On the other hand, 72% of homeowners surveyed by Lexis Nexis Risk Solutions they are willing to pay higher premiums to ensure they are fully coveredfound its latest report on US home insurance consumer statistics.

Just more than half, 51 percent, say they know the specifics of their homeowners insurance policy; an industry review suggests these people may actually be underinsured.

“Insurance carriers have the opportunity to proactively engage with homeowners, especially those with a set-it-and-forget-it mentality, to ensure they are adequately covered and informed about the risks constantly evolving that are present in the home insurance market,” said. Cole Winans, vice president and general manager, home insurance, LexisNexis Risk Solutions, in a press release.

“It is becoming more necessary than ever for carriers to adopt a consultative mindset with consumers who may be looking to shop around simply based on higher premiums. Our research indicates that consumers in both cohorts studied are often willing to pay more to cover unforeseen risks.”

Homeowners with a set-it-and-forget-it mentality, 47% of respondents to the Lexis Nexis Risk Solutions survey, are less involved in the details of their policies.

Just under six in 10 of all consumers are very concerned about a situation in which they should use their homeowners insurance policy.