Replacement material pricing shows signs of moderation
However, replacement costs are still unusually high and most carriers may not yet notice the moderation.
After years of inflation resulting from the COVID-19 pandemic, homeowners insurance professionals can take a small breath of relief. Pricing for some building materials is remaining consistently flat for the first time since 2020.
The latest data from our company, itel, which manages pricing data for building materials to help property insurers accurately settle claims, show that siding, flooring and roofing prices have mostly held steady for more than a year, following several years of significant inflation.
Most notably, since January 2023, we’ve seen flooring prices reduce by approximately 4%. Our flooring price index includes all flooring types, including carpet and hard surfaces. Siding and roofing material prices increased by just 0.8% and 0.25%, respectively, in the same 16-month timeframe.
These trends represent a significant slowdown from prior inflation, which, included roofing and flooring prices rising by 15% and 10%, respectively, between 2021 and 2022.
I’m sure you’ll agree this is all welcomed good news for an industry that continues to experience more than its fair share of challenges, from consecutive years of claim severity increases to underwater loss ratios forcing carriers out of certain states. This moderation is a positive sign that will not only help insurers maintain appropriate loss ratios, but it will also help manage rising policy costs for homeowners.
But, in the big picture, replacement costs remain uncharacteristically high, and most carriers may not yet feel the moderation to a degree that will truly move the needle and improve bottom lines.
While we all hope that progress against inflation continues to be made, carriers must, in a challenging environment, continue to research and deploy strategies that create more efficiency and accuracy in claim settlements.
For example, the idea of a “touchless” claim — a process that involves no direct, in-person contact between the adjuster and consumer — has been implemented successfully in other sectors, such as automotive insurance, creating more financial and operational efficiency and a seamless homeowner experience.
While the complexity and customization of homes and their claims make 100% touchless claims less feasible in this sector, data and technology can empower adjusters to “touch less,” ultimately settling claims faster and more effectively. These best practices can help to lessen the impacts of inflation now and generate more stability in the future.
A long road remains ahead for normalizing homeowners insurance. Moderation in inflation is a promising sign and could be the start of more good news to come. But for now, insurers must continue to search for operational resiliency and implement innovative solutions to offset inflation’s impacts, which can pay dividends today and into the future.
Chris Touchton is president of itel.
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