Catastrophes, high competition and increased regulation will continue weighing on the industry.
Los Angeles, CA (PRWEB) February 12, 2013
Homeowners' insurance is the third-largest insurance line in the property and casualty marketplace. About 96.0% of all US households have homeowners' insurance. Demand for homeowners' insurance is generally resistant to economic fluctuations because it is considered an essential in providing financial protection against the inherent risks of homeownership. The industry's supply of homeowners' insurance and underwriting results vary significantly by geographic region and are based off of local claims costs, profitability and competitive market conditions. “While Homeowners' Insurance industry revenue growth is generally stable and in line with expansion in the number of households,” says IBISWorld industry analyst Doug Kelly, “industry profitability is highly volatile due to catastrophic losses in coastal regions and the Midwest.”
Over the five years to 2013, revenue for the Homeowners' Insurance industry is expected to grow at a slow 0.8% average annual rate, including a modest contraction of 0.1% to about $65.4 billion anticipated in 2013. While industry revenue slowly increased every year in constant terms, it experienced slight declines in 2009, 2011, 2012 and 2013 in current US dollars. Industry firms struggled to deal with the severe financial crisis and recession that weakened demand and limited new business from a depressed housing market. Insurers raised prices at a 2.4% annualized rate from 2008 to 2013, but this was not enough to offset higher claims costs resulting from record losses in 2008, 2011 and 2012. The industry instead had to rely on growth in investment income, rate increases and reduced capacity to offset underwriting losses. The industry has a medium level of market share concentration; all major players are well-established insurance firms that provide homeowners' insurance across the United States. There are also many small firms that only operate in local and regional markets. Large firms, such as major players State Farm, Allstate, Farmers Insurance Group and Liberty Mutual Group, benefit from having significantly more capital, allowing them to maintain more diversified investment portfolios. “In general, having a large client base located in different geographic regions can mitigate claims from catastrophes and natural disasters,” adds Kelly. “In 2008 and 2011, however, the incidence of fires and natural disasters shot up across the country, leading to major losses for industry companies.”
Industry insurers will continue to be tasked with adapting to an increasingly difficult operating environment over the next five years. From 2013 to 2018, IBISWorld forecasts that industry revenue will increase. Premium growth will be underpinned by continued price increases and improvements in underlying housing market conditions, while investment income will also get a boost from surging financial markets reacting to improving economic fundamentals. However, climate change will continue to increase the frequency and severity of losses for industry firms, hurting their profitability and causing them to reduce capacity and consolidate to lower costs. High competition and increased regulation will also weight on profit margins in various geographic regions. For more information, visit IBISWorld’s Homeowners' Insurance in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes insurers that underwrite (e.g. assume and manage risk) homeowners' insurance policies. Homeowners' insurance is the third-largest insurance line in the property and casualty market. It protects households against property damage or losses due to catastrophic disasters, theft and other causes. These policies also protect against personal liability that may arise from bodily injury that occurs on one's property.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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