2022 MA Home Insurance Report Part IV | Claims, Loss Ratios, Cancellations & Non-Renewals

Our fourth and final look at the DOI’s Annual Home Insurance report reviews some of the latest data in the Commonwealth’s home insurance marketplace with respect to Claims, Loss Ratios, Cancellations, and Non-Renewals.

Unlike the private passenger auto insurance marketplace in Massachusetts, there are no laws requiring that a property owner have home insurance. Since 1996, however, the Division has been required to produce a Home Insurance Report pursuant to M.G.L. c. 175 Sec. 4A & 4B. The purpose of the Commissioner’s Annual Report is to shed light, as well as educate consumers, with respect to the composition and health of the overall home insurance market in Massachusetts.

On a final note, it is worthwhile to remind our readers that this four-part series is a distillation of the report reproducing only some of the major findings and graphs. To review all the details and information included in the report, please refer to the full official report on the Massachusetts Division of Insurance website.

The Total Number of Home Insurance Policies in The Past Year

As mentioned in our first look at this year’s Home Insurance Report, the number of homeowners’ insurance policies increased overall, but not by a lot. According to the DOI, the total number of home insurance policies rose by approximately 8,760 policies from 2019 to 2020, or from 2,048,711 to 2,057,471. This works out to a percentage increase of 0.43% and reflects a much smaller increase than in past years. In comparison, between the years 2018 and 2019, the increase was by approximately 29,099 home insurance policies.

Agency Checklists compiled the following chart on the total amount of home insurance policies by year based on a combination of data from the Home Insurance Report it has reviewed since 2015.

Chart by Agency Checklists. Data courtesy of the DOI.

Total number of insurance claims and average claim loss

A review of the Division’s findings with respect to past claims and expense trends:

In 2020, a total of 66,083 claims were filed by insureds with their home insurance companies, approximately 3.2% more than the previous year.Of that amount, 87% or 57,609 were claims involving a traditional single homeowners’ policy.Tenant & Condominium claims saw very little year-over-year change as outlined in the table below.

Chart by Agency Checklists. Data courtesy of the DOI.

As the Division outlined in its report, claim trends are largely dependent upon the weather events that happen within any given year. In 2020, there were nine officially designated weather catastrophes. The total amount of damage from these weather events totaled $295.8 million, an increase from the previous year’s total of $174.3 million. While the amount of damage from these weather events increased, the DOI noted that the total number of filed claims “decreased correspondingly from 2019 to 2020.”

Average size of claims

The average dollar amount of individual incurred claims also decreased across all three types of insurance policies as compared to the previous year. Traditional home insurance policy claims decreased by 6.6%, while claims decreased 4.9% for Condominiums and 16.8% for Tenant policies.

Chart by Agency Checklists. Data courtesy of the DOI.

Claim Experience Data – Water Still Trumps All Other Claims by Cause of Loss

In order to protect against future claims as well as develop loss control programs aimed at reducing or preventing future losses, insurers tend to categorize and track submitted claims by certain categories. They are typically the following:

FireWindWaterTheftLiabilityAll Other

As the data from the DOI shows below, the overwhelming number of claims submitted in 2020 involved wind claims with a total of 44,476 claims citing this cause of loss. In previous, water damage had been the number one cause of claims, which also saw a growth in claims this year, albeit much less than in the wind category.

The following are additional statistics highlighted by the DOI:

Wind & Hail: 23.5% of total 2020 losses, an increase from the 15% in total 2019 losses. Fire, Lightning, & Removal: Claims increased to 33.6% in 2020 from 32.6% in 2019.Non-Flood Water Damage & Freezing: Losses represented 38.2% of total losses in 2019 versus 28.4% in 2020.Theft: Just 0.8% of total claims in 2020 versus 0.7% in 2019.Liability & Medical Payments: 5.6% of total losses in 2020 versus 6.6% total losses in 2019.

Chart by Agency Checklists. Data courtesy of the DOI.

Decrease in Flood Insurance Policyholders Continues in 2020

The DOI report states that FEMA noted a 3.4% decrease in the number of policyholders in Massachusetts who had flood insurance in 2020 versus 2019. In 2019, there were 58,711 policyholders who reported having flood insurance as opposed to 56,707 in 2020.

Chart by Agency Checklists. Data courtesy of the DOI.

Loss ratios 2008-2020

As the Division explains in its report, loss ratios are the “generally accepted measure of the underwriting success or failure of property insurance”. It noted further that while non-weather events typically do not “cause major shifts in loss trends”, weather-related events and “catastrophes” often due, as evidenced particularly in 2011 and 2015. The following is an overview of Total Home Loss Ratios for the entire homeowner’s marketplace in Massachusetts since 2011.

Chart by Agency Checklists. Data courtesy of the DOI.

Loss Ratios by Form

While there were nine weather events cited by the Division in 2020, overall, the loss ratio for this year is lower than in 2019, “…primarily due to the variability of the weather and of the number of homes impacted.” As for the individual loss ratios by type of policy, unsurprisingly, traditional homeowners had the highest loss ratio, followed by Condominium, and then Tenant policies.

Chart by Agency Checklists. Data courtesy of the DOI.

Adjusted Combined Loss Ratio

Select Data from the DOI’s Calculations of Adjusted Combined Ratios

YearEarned
Premium
(000’s)Loss RatioAdjusted
Loss RatioProducer
CommissionsExpense RatioCombined Ratio
Adj Loss Ratio +
Expense RatioAdjusted
Combined
Ratio
(incl Mutual
Divs)2020$2,322,93339.2%43.6%16.7%33.8%77.4%78.0%2019$2,246,34640.2%44.9%16.4%33.5%78.4%79.1%2018$2,185,32848.8%54.0%16.3%33.3%87.3%87.8%2017$2,108,51336.8%41.2%16.4%33.9%75.1%75.6%2016$1,995,19039.6%44.9%16.2%33.8%78.7%79.2%2015$1,907,594128.5%146.5%15.6%32.9%179.4%180.1%2014$1,823,59739.6%45.0%16.8%33.9%78.9%79.6%Selected data from the original chart produced by the Massachusetts Division of Insurance.

Cancellations & Non-Renewals in 2020

Urban & Coastal Cancellations

Chart from DOI Home Insurance Report

There were 503,739 policies in force as reported by the top 25 insurers and FAIR Plan in both urban and coastal areas in 2020.A breakdown of that number reveals 312,380 policies in urban areas and 191,359 policies in coastal areas.Of the total amount of urban and coastal policies in-force, 387,754 homes were insured by insurance companies while 115,985 were insured under the FAIR Plan.In 2020, 81,385 policies were cancelled in both urban or coastal areas.59,498 policies were cancelled in urban areas43,704 were initiated by the policyholder15,794 were initiated by the insurer21,887 policies were cancelled in coastal areas18,741 were initiated by the policyholder3,146 were initiated by the insurerOf the 81, 385 cancelled policies in both urban and coastal areas64,416 were cancellations with the top 25 companies16,969 were cancellations of FAIR Plan policies

Notes on Non-renewals

As part of its research into this report, the Division asked the top 25 insurers and the FAIR Plan about the number of cancellations and nonrenewals that stemmed from insurers as opposed to those initiated from the policyholder. In addition, it queried insurers whether or not these renewals were made during the first 60 days of the policy, typically when an insurer may non-renew without a specific reason, as opposed to nonpayment of premium or other reasons as permitted by law to do so after the first 60-day period. The following are some key data points taken straight from the report:

In 2020, 387,754 urban or coastal policies were renewed by the top 25 home insurance companies.From that number, there were an estimated 28,779 claims filed during the same reporting period, representing an average of 74 claims filed per 1,000 policies renewed in 2020.In total, the top 25 home insurers paid $301,072,587 in claims during the reporting period.The average claim size was $8,744.Looking at the number of claims that were urban versus coastal, the DOI states there were 85 claims filed per 1,000 coastal policies versus 69 claims per 1,000 urban policies.The average claim for coastal policies was $10,065 while for urban policies it was $7,988.The top 25 insurers reported 1,986 policies that were not renewed. Of that number, 746 involved claims filed in 2020 for an average of 376 claims per 1,000 nonrenewed policies. The average claim size was $27,029.

How to obtain our past articles on or further information about this report…

This four-part summary of the Division of Insurance’s report on homeowner insurance to the Massachusetts Legislature covered some of the highlights from the report we thought might be of interest to our readers.

Here are the links to the first three articles:

The report also has additional information that we have not included that was of perhaps lesser interest and also the report references the underlying data that the Division used in compiling the report as a statistical supplement. While the Report and its Statistical Supplement can be found on the Division’s web site, feel free to contact Agency Checklists, if you are having trouble obtaining a copy of the report.