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How including accurate measurements of homeowner’s insurance in the CPI will curb increasing claims and premiums

e2Value

Inflation is steadily restricting Americans’ buying power and raising costs across all areas of life. The Consumer Price Index (CPI) doesn’t accurately measure how homeowner’s insurance is affected by inflation, creating risk for insurance carriers and homeowners in the form of lost value and increased payouts. Understanding the accurate value of a home regardless of economic challenges will enable all players to sidestep heightening risks like climate change. e2Value, a full-feature asset valuation provider, notes that updated, flexible technology is critical to bridging the gap between a policy and the reality of coverage limitations. The company is supporting homeowners and insurance carriers to fight inflation with comprehensive, in-depth valuation tools.

The cost of homeowner’s insurance has been surging in recent years, driven by increased storm activity and supply-chain impacts after the pandemic. During COVID, inflation outpaced its expected benchmarks, increasing premiums and restricting coverage limits in all areas of insurance. These trends are causing sticker shock and undermining the American dream of homeownership. While insurance carriers are justified in their concern about paying out increasing settlements, most Americans can’t afford to self-insure. Those who do have coverage on their home aren’t free from concern either. Research has shown that most owners don’t review their home policy’s coverage to ensure that it is sufficient, leaving them vulnerable to unexpected financial losses.

According to a recent report, the CPI has failed to accurately reflect the drastic increase in home insurance premiums. Due to limited inclusion in this key inflation metric, the index only reports a tiny fraction of the true year-over-year increase. Home insurance costs surged to over $175 billion in 2023, up 21% from the previous year.

By not including this information, the CPI is not measuring all of the impacts of increasing climate costs, which cause billions in damage each year. At any moment, less than one-third of the US population is impacted by the CPI measurement of housing costs in the US. Housing costs play a significant role in the CPI, which tracks inflation. The Bureau of Labor Statistics (BLS) accounts for housing costs in the CPI through these factors: Shelter component, rental properties, and owner-occupied homes.

e2Value’s full-feature valuation tools address inflation concerns by ensuring that clients understand the true value of their structures. From residential, and commercial, to farm and ranch, the company empowers owners and insurance carriers to manage premiums and avoid potential financial losses caused by a lack of accurate replacement cost value.

e2Value has championed patented valuation technology for over two decades, equipping clients with best-in-class tools for calculating replacement cost values for virtually any structure. The company has provided thousands of users with a standardized, up-to-date approach to valuation. e2Value’s innovative technology became one of the most used systems in the industry in under 10 years. The company’s founders are deeply committed to disrupting the insurance space with novel strategies that protect owners from unseen costs.

A report on rising home insurance costs by Policygenius cites “record-high insurance industry losses, more severe climate disasters, prolonged wildfire seasons, and higher construction prices” as some of the reasons for higher home insurance premiums.

Inflation is part of the reason for increasing claims costs for all structures including emerging types like barndominiums and kit homes.  Rebuilding cost inflation is also driven by a changing job market and a robust economy. Why does this matter? The more disruptive inflation becomes, the more complex it will be for Americans to own or possibly rent their homes. It’s difficult for this problem to be resolved overnight, but advocating for the CPI to include accurate figures for homeowner’s insurance is a step in the right direction. Simultaneously encouraging homeowners to review their policies every year is also critical for lowering premiums and keeping an asset fully insured.

According to e2Value CEO Todd Rissel, inflation is a misunderstood macroeconomic concept. Even in the insurance industry, where risk and value are pitted against one another daily, many carriers and consumers lack an understanding of what factors are important for them to focus on.

According to 2024 insurance forecasts, climate risks and cybercrime are expected to increase steadily. These trends will naturally increase premiums and restrict consumer access to coverage, creating a highly concerning issue for property owners across all sectors. Insurance carriers will be forced to discover new mitigation strategies for lowering claims and losses in an increasingly complex global landscape.

Digital Trends partners with external contributors. All contributor content is reviewed by the Digital Trends editorial staff.
Chris Gallagher
Chris Gallagher is a New York native with a business degree from Sacred Heart University, now thriving as a professional…
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