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VU White Paper Outlines Steps to Correct Homeowners' Insurance Affordability Crisis



ALEXANDRIA, VA, Sept. 13—While the recent hard market has created a homeowners’ insurance affordability problem for many consumers, a new report issued by the Big “I” Virtual University (VU) offers several suggestions for alleviating this burgeoning problem.


The VU is a state-of-the-art, online insurance educational and informational resource program offered by the Independent Insurance Agents & Brokers of America (the Big “I”).


The report—titled “How to Solve the HO Availability/Affordability Crisis”—written by VU Director Bill Wilson, is a featured white paper in the VU’s Research Library, a one-stop reference resource with hundreds of articles on a wide range of subjects, and links to annotated ISO forms.


“Years of underpriced and overly generous homeowners’ policies, coupled with miniscule deductibles and increasing claims largely attributable to water damage and mold, have tightened the marketplace,” says Wilson. “Homeowners who report just water damage claims are increasingly finding themselves facing non-renewal. Fortunately, there are steps that both insurers and consumers can take to mitigate this recurring problem.”


In the report, Wilson argues that homeowners’ policies are too broad. The Insurance Information Institute says 80 percent of all homeowners’ losses are caused by fire, lightning, windstorms and hail, water damage and freezing, or theft. In addition to these perils, as well as earthquakes, flooding and normal wear and tear, Wilson says other unusual occurrences cause relatively few losses but result in voluminous, complicated claims that often require litigation and generate claims expenses disproportionate to the exposure.


Another problem, according to Wilson’s report, is that homeowners’ insurance deductibles are too small. Wilson argues that the typical insurance deductible of $250 does nothing to encourage homeowners to practice loss-prevention measures, such as using smoke alarms or surge protectors on major appliances.


“Car owners often have $500 deductibles for their automobiles, while the ‘standard’ homeowners’ insurance deductible is usually $250. It doesn’t make any sense for a car to have a higher deductible than a home,” says Wilson. “This does nothing to encourage loss prevention, which is one of the principal purposes of a deductible.”


Along those same lines, the report reveals that another problem is the lack of loss-control services or measures provided by insurers. Wilson points out that in some cases, compliance with loss- control recommendations is mandatory in the commercial-lines market to make a risk acceptable to the underwriter, and that non-compliance is often grounds for cancellation.


“A risk-management approach to controlling personal-lines losses is an idea whose time has come,” says Wilson.


To combat these problems, Wilson offers a variety of suggestions:

  • Return to a “named perils” and “open perils” approach and apply homeowners’ coverage on a two-tiered basis. Specifically, use the “named perils” designation for common losses—fire, windstorm and water damage—and use “all risks” when referring to “unknown” but potentially catastrophic situations. Separate deductibles, depending on the circumstances, should apply as well with a significantly higher one for catastrophic losses.
  • Raise the typical homeowners’ deductible to 1 percent to 2 percent of the value of the home or institute a flat-rate deductible; the VU report recommends $2,500.
  • Apply a risk-management approach to controlling personal-lines losses. The VU provides home-loss prevention checklists for insurance agents and their clients.


“How to Solve the HO Availability/Affordability Crisis” and other VU white papers are available exclusively to VU subscribers and Big “I” members. Big “I” members get free, unlimited access to the VU as a member benefit. Individual, non-Big “I” member subscriptions are available for a $395 annual fee. Non-Big “I” member groups can purchase 10 or more individual subscriptions at discount pricing of 10 percent off each when purchased together.


Individual subscriptions can be purchased online at the VU using a major credit card. To do so, visit and click on the “Virtual University” link. 


VU subscriptions will not be required to access online insurance educational classes. The prices of these classes vary by topic and length.


For more information about Big “I” membership and VU subscriptions, please visit


Launched in 1999, VU offers agents and brokers access to the most comprehensive and integrated learning system in the industry. Big “I” members and VU subscribers get unlimited access to more than 4,000 pages of timely industry information; a subscription to VUpoint, the biweekly VU e-newsletter and its fully searchable archives; immediate access to a library of “white papers” on hot insurance topics; and can use the VU “Ask an Expert” service.


Founded in 1896, IIABA is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—as well as employee benefit plans and retirement products. Web address:




​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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