Homeowners cancel insurance policies for myriad reasons, including selling their homes or shopping their coverage with a different carrier. In some cases, however, cancelations may occur because of underwriting cancelation or material misrepresentation. Uncovering prior home insurance policy cancelation reasons can help you create a more accurate risk profile of an insured.
Identifying home exposures at time of quote can prove difficult if you don’t have a full view of the applicant’s past home insurance history. For example, a lapse or expiration of a home insurance policy might not immediately be cause for concern. If a lapse or expiration occurs without an address move or a carrier change, then this could indicate a potential risk. Also, a modest number of insured address changes or home insurance carrier changes over a long period of time does not necessarily result in heightened risk. Seeing numerous address or carrier changes over the course of a few years, however, can be a red flag, especially if these two indicators appear simultaneously. In fact, a LexisNexis® Risk Solutions industry study found that homeowners who moved frequently and changed carriers frequently had a 40% higher loss ratio relative to the industry average.
Some higher risk exposures are more straight-forward to determine at time of quote. Clearly, material misrepresentation or suspension/revocation of coverage would be cause for underwriting concern. Insurance carrier underwriting cancelations or non-renewals are rare and should be noted during the new business underwriting review. The challenge for insurers is determining all this information at time of quote.
Often, consumers might not be fully aware or may be hesitant to reveal prior insurance cancelation reasons. He or she might not have understood the legal wording related to prior non-renewal or non-payment notifications. In these situations, you can significantly improve your underwriting risk by using data from LexisNexis® Current Carrier® Property, which includes cancelation dates, expiration dates, revocation dates and the reason codes for each of these. Policies that were previously non-renewed for underwriting reasons should be reviewed to ascertain whether those prior underwriting risks have been resolved. Insureds that exhibited high cancelation rates or behavior resulting in non-renewal are higher risk according to an industry study done by LexisNexis Risk.
For more on how Current Carrier Property data can help uncover policy cancelation reasons and get a more complete picture of risk, visit our website or contact us at 800.869.0751.