Insurers could return to underwriting profit on homeowners policies, says Aon
Homeowner insurance premiums could catch up with loss inflation next year and insurers should return to underwriting profitability by 2025—provided inflation does not surge again, according to a new study by Aon.
Homeowner insurance premium increases have lagged behind inflation and the cost of claims, raising the spectre of causing inadequate rates of return on capital, Aon said in its annual “Homeowners Return on Equity Outlook”, released in time for this week’s APCIA conference.
Home insurance policies usually have a built-in inflation guard, but this can lag behind actual inflation and the adjustments require approval from state regulators, delaying implementation, Aon said.
Aon said the inflation guard may also underestimate loss inflation and needs to be earned over the policy period, which means there is an inevitable lag if inflation continues to run ahead of expectations.
However, Aon said, if various criteria are met, then rates should catch up with inflation-driven loss trends by next year.
Those criteria are that:
