Letter from Washington: Homeowners insurance is a crummy business

There’s an elephant in the room I probably should mention:  someone impersonating a Heartland Institute trustee defrauded Heartland last week, stole internal documents and created one outright fake.  The identity thief has since been revealed to be Pacific Institute President Peter Gleick , although he insists that he “received” the fake document in the mail anonymously and was not its author. Heartland’s official statement on the issue is here .

Heartland’s Center on Finance, Insurance and Real Estate, which I run and which publishes this blog, doesn’t work on the climate change issues that are the focus of the dispute. OOTS readers interested in them should visit our sister site, on Environment and Climate Policy .  With that out of the way…

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At a time when about half of the insurers in the most windstorm-prone state in the country (Florida) are at serious risk of insolvency, the Consumer Federation of America has announced that homeowners insurance rates have to be suppressed always and everywhere in the name of fairness. As OOTS editor Ray Lehmann explains in this press release , that’s totally untrue and based on faulty analysis of the data that conflates all lines of insurance with the homeowners line. But even Ray’s comments and my own don’t get to a deeper issue: homeowners’ insurance is a lousy business.

This doesn’t mean that insurers are all going to the poor house.  Insurance, taken as a whole, is a pretty good way to make money. It’s not as good as, say, being Apple but better than being an airline or a newspaper. Companies that operate in the admitted insurance market where most people buy their risk transfer products are pretty stable. But, among the major products sold in the admitted insurance market—auto, life, workers’ comp, and commercial insurance—homeowners is almost certainly the worst business.

Let’s look at the facts. For a variety of reasons – including the relative infrequency of claims, the large magnitude of expected claims and the fact that homeowners insurance policies aren’t loaded down with extras – a look at any ten-year period will show that insurers pay out just about what they collect in premiums, meaning that they can only make money off of investments.

Geico Home Insurance Owner - News


Allstate reports drop in market share, exclusive agencies
Allstate reports drop in market share, exclusive agencies

The report also said that, in 2010, the latest period for which figures are available, State Farm, Allstate and Geico had car insurance market share of 18.1 percent, 10.4 percent and 8.6 percent, respectively. In 2009, Allstate's share,



Letter from Washington: Homeowners insurance is a crummy business
Letter from Washington: Homeowners insurance is a crummy business

First, no sizeable company, to my knowledge, writes only homeowners' insurance while there are any number of companies—including some household names like GEICO (auto) and John Hancock (life)—whose insurance businesses are confined to a single line.



GEICO Asks: 'Who's the Funniest Fed?' in D.C. Standup Comedy Competition ...

In addition to auto insurance, GEICO offers customers insurance products for their motorcycles, all-terrain vehicles (ATVs), travel trailers and motorhomes (RVs). Coverage for life, boats, homes and apartments is available through the GEICO Insurance



Lucas Oil Modifieds Set For A Stellar 2012 Season
Lucas Oil Modifieds Set For A Stellar 2012 Season

(Source: MORE TH>N BUSINESS October 2009) when you buy online as well as other great offers when you buy a business insurance product. With our home insurance policy, when you buy buildings insurance, we'll give you contents insurance up to £75000



The dirty little secrets of auto-insurance premiums

My colleague David Hiltbrand traces the history of Flo and the Geico Gecko in an article today about the flood of TV ads for auto insurance over the last decade. As he explains, Geico was a pioneer in bypassing agents and selling directly to consumers.




Home Insurance: Geico Home Insurance Owner

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Geico Home Insurance Owner - Bookshelf

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