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Homeowners insurance is such an incredibly brutal business: - Average annual profitability for the industry is less than 1% - In any given year, insurers lose money in about 1/3rd of the states - Since 1977, profits were >10% in only 5 years, and have never exceeded 15%

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Brian Potter

@_brianpotter

Jan 23

Are climate-driven disasters driving up the costs of homeowners insurance nationwide? This week on Construction Physics I look and see. construction-physics.com/p/why-is-homeo

3:35 PM · Jan 23, 2025

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Alec Stapp

@AlecStapp

Jan 24

Very useful summary of the sources of increasing homeowners insurance losses:

Someone should invent hail resistant roofs.

Maybe the insurers should

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Kurtis Hanni

@KurtisHanni

This last year+ has been a dream. I meet with business owners daily to look for financial solutions. We help them: 1. Optimize their cash flow 2. Create more profit 3. Pay less taxes But more than anything, we’re a strategic partner and coach. Someone they turn to when they

I've had higher profit margins selling Alibaba junk on Ebay!

lol

Truly it is

And yet states still try to regulate the premiums…

Shane Martinez

@ShaneMa01033790

Jan 23

what happened in the early 90s?

If Hurricane Andrew caused the insurance industry as a whole lose about 36%, why haven't we seen anything even CLOSE to that with 2004 with Katrina, Rita, etc. or any other major disaster years? i

Ooc do you know if margins here include net interest on float? I’d naively assume it’s more meaningful for home insurers vs eg health just given spikier payouts?

It's a forward looking Ponzi scheme..

Tobias Maximus

@tobyzapf

Jan 23

Maybe premiums should be way higher on average. Just a thought.

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No. The percent of insured property that gets destroyed each year is declining

Maybe they need a better business model other than denying valid claims to maintain that 1% margin.

This can’t be true. I was told they denied people fire insurance in a wildfire area because they are greedy

YIMBY massively increase housing supply and costs will go down

Is this underwriting profit or net profit (after investment income from float)?

Why are they making such low profits? Even European insurers make more than that in home insurance

isn't one of the guys from The Big Short (real person, not actor lol) shorting insurance companies in high-risk areas based on climate change arguments?

What happened in the early 90s?!?

reguile

@reguile1

Jan 23

I spy with my little eye hurricane Andrew.

A large part of that dip in the 90's was investment in IT technology completely redefining how the business was conducted. It is generally an extremely low risk business if it is being managed correctly. But every time there is a regulatory change, they have to recalculate.

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Malarkey Roofing Products

@MalarkeyRoofing

It takes over 6,000 nails to properly secure a roof. Even one out of place can lead to leaks or void a wind warranty. That’s why we patented the industry’s first larger nailing area, called The Zone®. #FeatureFriday #Weatherproof

So short of massive innovation in residential construction that makes weather disasters much less costly or destructive (very cheap concrete replacing stick construction, tile roofs that cost what shingles do today) insurers are just going to spiral until building codes tighten?

Won't somebody please think of the poor insurance companies? Nobody believes this absolute nonsense.

Donal

@Spelt_D_o_n_a_l

Jan 23

Tbf, if they’re doing it right, a nationwide insurer probably *should* be losing money in approximately 1/3 of their markets. Provided it’s not the same 1/3 every year.

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David Timoney

@fromarsetoelbow

Jan 23

Lol. Insurance is a business that thrives on small profits because absent a freak event (at which point they all clamour for state support) the income is guaranteed. It is the opposite of "brutal". If it were otherwise, there'd be no business. x.com/AlecStapp/stat…

The volume at which home insurance companies operate means they should have low margins. If you have a mortgage, you are required to get home insurance. Most home loans have it built in. For them to have high percentage profitability margins at that volume would be insane.

One of the worst trends in recent history is that people took their grievances with the health insurance industry and applied it to all insurance. Home insurance companies should absolutely be pricing in risks, but Americans have lost sight of how insurance is supposed to work.

The float though

wtf happened in 1991? Were they insuring homes in Iraq?

Sean

@sean91237

Jan 23

This has to be underwriting profit. I assume they also make bank on the carry of premium. That can easily be a quite high return on equity. A lot of insurers have losses on premiums. Think geico was a rare one that got profitable underwriting

Most of the retained earnings from insurers come from their investments. They buy bonds to match the durations of the premiums they write. Once the bonds mature, they invest the cash—usually quite poorly.

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@MisterLogistic

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And it gets harder to predict every year

Gary Shaw

@GaryMerseybox

Jan 24

Nah.

Pacific Coast Capital

wheres the float.

womp womp

my next renewal i'm going to shop with regional companies not exposed to the big claims states to see what happens

justin alpert

@JustinAlpert

Jan 24

Guess we need to build stronger homes. Really. This is an argument for universal building standards.

The Wasatchquatch

@waschatchsquach

Jan 24

was 1990's the flooding along the Mississippi?

Richard Dorman Jr.

@RichardDormanJ3

Jan 26

What happened in 1993

Yogi bond bear

@BondYogibear

Jan 23

Meanwhile State Farm sponsors sporting events for millions . Not feeling sorry

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Evan Stravers

@evanstravers

Jan 23

Insurance should be a nonprofit industry

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Kurtis Hanni

@KurtisHanni

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Cancellation Chronicles

@CancellationCh1

Jan 24

Profit is the numerator. What is the denominator in the % profitability calc? NYU Stern reports Returns on Equity for P&C Insurance (includes home) are greater than 20%. pages.stern.nyu.edu/~adamodar/New_

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Noah Smith

@Noahpinion

This is a very bad idea

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This. And I said it at the time. The SAT was the best thing that ever happened to actually disadvantaged people-- before that, you got into selective colleges based on being born into the elite. x.com/tracewoodgrain…

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SF should look like Manhahattan and instead it looks like this.

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