An almost 60% rise in property remodelling since 2009 has resulted in a misalignment between insurance premiums and risk exposure, according to a new report by BuildFax, a provider of property condition and history insights.
Leveraging 23 billion data points, BuildFax observed a 58.9% increase in residential remodelling activity from 2009 to March 2018, compared to a 36.2% decline from 2005 to 2009.
Commercial remodelling activity was found to have increased more slowly, at 16.3% over the same time frame, compared to a respective 14.4% decline leading up to 2009.
BuildFax cautioned that without visibility into property changes, the resulting exposure could create unsustainable risk that directly impacts carriers’ bottom lines, although it also noted several trends that could help re/insurers mitigate risk.
For example, BuildFax observed that residential remodels were up by 8.6% and commercial remodels by 3.2% in the first half of 2018 alone, compared to remodels in the first half of 2017.
Additionally, permits for alterations, additions, and remodels were pulled for 40.4% of residential properties and 47.4% of commercial properties in the last five years, while 9.7% of residential properties and 24% of commercial properties experienced remodels valued at more than $25,000 in the last decade.
“As homeowners continue to remodel existing properties—and in light of the upcoming hurricane season—carriers must be vigilant in addressing changes to their insured’s properties,” said Jonathan Kanarek, Chief Operating Officer (COO) of BuildFax.
“Leveraging our depth of data and insights enables carriers to optimize inspection strategies, reduce operating costs and ultimately recover premium leakage at scale.”
In April 2018, BuildFax also found that roof remodels had more than doubled in Florida over the last 10 years, a trend which it suggested had not been considered in recent reinsurance negotiations and catastrophe risk models.