Carriers seek increased profitability in the hardening Florida insurance market

February 25, 2020 / 2 min read

The property/casualty market in Florida experienced a notable shift in 2019. After several years of soft market conditions, the insurance industry is showing early signs of a possible hardening. This change is driven in part by heavy insured losses stemming from recent catastrophes, increased construction labor and materials costs, and a slowing housing market.

As a result, property insurers are pressed to further improve profitability by tightening underwriting guidelines. With robust property data and analytics, such as the ability to assess notable property upgrades, underwriters have greater insight into the risks that have the potential to lower loss ratios.

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Major system updates improve loss ratios

A recent analysis by BuildFax revealed that the more major system updates a property experienced, the smaller its resulting loss ratio. Major system updates are one of the most prevalent indicators of loss for a property, including improvements to building, plumbing, electrical, and mechanical systems. Here, building maintenance is defined as structural work on a property outside of plumbing, electrical, and mechanical work.

For instance, properties between 16 and 30 years old that underwent three or four major system updates had a loss ratio 55% lower than those with no major system updates. Additionally, properties that underwent one or two major system updates had a 40% lower loss ratio than those with none.

This analysis revealed a few key findings in older properties:

There’s a direct link between maintenance projects and a property’s risk of loss.
As carriers shift their focus toward tightening underwriting guidelines, obtaining accurate property insights will enable carriers to restructure their portfolio for optimal profitability.
Insurers can better segment risk with deeper insight into the condition of plumbing, mechanical, and electric systems to systematically reduce loss ratios.

Download our latest report for an in-depth analysis of the state of major system updates in Florida today.