Aon Benfield, a global reinsurance intermediary for the Aon Corporation, has released a new report concerning the state of home insurance rates in the U.S. The report shows that potential profit in the home insurance market has dropped from 6.9% in 2010 to 4.8% this year. The report suggests that the drop may be due to property insurer’s not pricing homeowner’s insurance in accordance with risk. This is especially prevalent along coastal regions where the risk for catastrophic damage is highest.
Aon Benfield’s report shows that property insurers have shown a greater ability to recover from catastrophic events in recent years, but have not yet found a way to deal with exposure to risk. Insurers in coastal regions have been trying to raise rates on coverage for some time, but their efforts have been met with opposition from state insurance regulators that have deemed such increases excessive.
Overall, the report shows a significant improvement in the industry in terms of recovery, but Aon analyst say that greater efforts must be put towards raising rates to accommodate for heightened risks sparked by potential environmental factors. Given the volatile nature of natural disasters, especially those coming from the ocean, such risks can be difficult to manage. A turbulent economy may also hamper insurer’s want for higher rates, as insurance regulators are placing more attention on consumer benefit rather than business protection.
