Soft market prompts profit drive for homeowners insurance

The ongoing soft market has prompted many insurers to hunt for profits in what has traditionally been the unprofitable homeowners insurance market, according to George Hosfield, senior director of home insurance at LexisNexis Risk Solutions.

Speaking to PCI Today in Dallas, Hosfield said that in the past the homeowners insurance segment of the market had not been seen as a priority for insurers.

“From a reinsurance perspective, we might be in a broad, soft market, but the individual line numbers can tell you different story. Historically, auto has been the lead line in the US personal lines insurance business—insurers would sell auto insurance and tack on homeowners, as auto was always profitable and homeowners was more give and take,” he said.

“In the last few years, profitability challenges in auto insurance have emerged as the market has become a lot more competitive. A big message in the market has been to save money, so a lot of the profitability from auto has leaked out.”

As a result, Hosfield said, the homeowners business had come to a realisation that it can no longer remain as the unprofitable tagalong business and must instead stand on its own.

“It has to evolve,” he said. “We’re also starting to see some insurers lead with the homeowners message in their marketing, which was pretty much unheard of a few years ago.

“The way that’s impacting us in providing data analytics is that there’s increased interest in making the homeowners business profitable and on a par with the auto business in terms of a customer experience.”

Hosfield said that a special focus for LexisNexis Risk Solutions was on how it can help the industry develop more sophisticated pricing for homeowners insurance, as insurers attempt to become more precise in their pricing of risks.