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Metrics Insurance Companies Can Use for Profitable Portfolios

DataTree Insights: Metrics Insurance Companies Can Use for Profitable Portfolios

Millennials earning good incomes are the key reason behind a new surge in home ownership across the country. The Wall Street Journal reported earlier this year that more young buyers are purchasing their first homes, driving the U.S. homeownership rate higher for the first time in over a decade. 

That’s good news for homeowners insurance companies, as it seeks to boost its insurance lending portfolios to these new homeowners. The homeowners insurance industry is a $95 billion market and has been recovering slowly over the past decade from the recession. This uptick in home buying will likely lead to a growth in homeowners insurance policies, helping homeowners insurance companies stay healthy and profitable. 

Many homeowners insurers strive to grow top-line sales and achieve profitability on the bottom-line. There can be challenges like catastrophic losses from natural disasters and rising interest rates. But overall, home insurance companies can grow profitability by being prepared and adapting to shifting scenarios. Let’s take a look at the types of key industry metrics to keep their portfolios healthy and profitable.

Digging Through County Records

Homeowners insurance companies can scour property data to learn what it takes to insure a property. They should locate and use data on local construction costs and/or building codes. 

Local Construction Costs

Insurance costs will depend on factors of local construction like housing materials used (what type of exterior wall construction, type of frame, masonry, etc.), cost per square foot, special features and styles, and weather-dependent modifications. Homeowners insurance companies could also add on insurance for structural damage insurance. This would be based on the cost of rebuilding the home, rather than on the home’s actual market value. An example would be a $150,000 structural damage insurance policy to cover insurance if a home has an actual market value of $500,000, and rebuilding it would cost $150,000.  

Building Code Compliance

Building codes are updated over time, and insurers need to stay on top of these changes. Due to these changing building codes, some homes may need additional improvements to stay up to code. This is an area where homeowners insurance companies can increase their premiums, as homeowners insurance policies typically don't pay for any extra costs associated with rebuilding to meet the updated code. However, a majority of insurance companies pay some of this amount via an Ordinance or Law endorsement. 

Natural Disasters in Property Data

Insurance companies can also maximize their portfolio of existing policies in a variety of ways related to property data. One way to do this is to find out how to access the correct data on weather-related incidents, natural disasters in a region and other insights. Typical ways to do this is to look at proximity to earthquake fault lines, any possible fire damage, or the chances of flood damage. 

Proximity to Earthquake Fault Lines

Home insurance companies can offer earthquake coverage in regions know for earthquake activity. In California, for example, there is a state-run insurance pool run by the California Earthquake Authority that can pay out funds to homeowners in case of a major earthquake. If a homeowner is near an earthquake fault line, the homeowner’s insurance rates for earthquake coverage ranges between $100-$300 a year. Those states with higher incidences of earthquake potential, like California, Washington, Oregon and Alaska, tend to have higher premiums, with an average cost around $800. 

Prior Fire Damage Due to Natural Disasters

Your staff can look through county records and property data to find out if natural disasters in an area have led to prior fire damage. This is an important metric to check, as these types of natural disasters could be a seasonal phenomenon. Insurers should develop appropriate policies for this area to maintain business and drive profits over the long-term. 

Policy pricing could be impacted by fire damage caused by the following natural disasters: 

  • Lightning
  • Heavy ice, hail, snow or sleet 
  • Windstorms
  • Volcanoes

History of Flood Damage

Another metric that home insurance companies can use to grow their business lies in flood insurance policies. Flood insurance, which covers mudflow as well, is often purchased as a separate policy, with premiums ranging around $700 across the U.S. and higher in California. Homes in watery zones can find that these premiums can hit over $1,000 annually. 

The federal government has made it easier for homeowners in California to buy flood insurance. Nearly all of the state’s communities participate in the Fed’s National Flood Insurance Program. Insurance companies can also develop sales around policies for other types of water damage that require a separate endorsement. These could include overspills from sump pumps, drains and sewer systems. 

Your Data Solution

Data is the fuel to strengthen your business. Find customized research to meet your needs and help build business for the company. With DataTree, you can use our customized data solutions to find the right information you need to create healthy profits. Contact us today for a customized data solution for all the pertinent county records and property data you need for home insurance policies.

 
 
 
 
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