Claims and Expenses
Claims Count by Year
As the membership grows, we are naturally going to see an increase in the number of claims we receive. To date, this number is greater than 80,000.
The number of claims not related to catastrophes—like automobile accidents, thefts and interior water damage—can be expected to increase somewhat steadily, while claims from weather events like hurricanes and wildfires are less predictable. However, a well-diversified book of business can help to lessen the impact of this volatility.
When Hurricane Sandy hit the U.S. in 2012, a much larger proportion of PURE’s business was concentrated in the Northeast. Today, the membership is spread more evenly across the country. 2017 included two of our top three catastrophe events since PURE’s inception: Hurricane Irma and Hurricane Harvey. These two catastrophes, when combined with others throughout the year, caused 13 percent of PURE’s claims. This is a higher percentage than in previous years, but not nearly as high as that of 2012, when 28 percent of claims were attributed to catastrophes, primarily Hurricane Sandy. This difference can be heavily attributed to diversification.
PURE uses subrogation and salvage to help reduce the losses paid out during claims, which in turn helps to improve overall operating results, reduces the cost of insurance premiums and, in some situations, allows us to reimburse some or all of a member’s deductible.
The legal process of subrogation is used to attempt to recover losses when a third party is liable for the damage. This could be the other driver in an automobile accident, a contractor who installed a water line incorrectly or any other responsible entity. This ensures that the at-fault party, rather than the PURE membership, bears the cost of that claim.
Salvage, the amount we are able to recover for saleable parts of damaged items, also helps to lessen the financial impact of a claim. The increased value we received for flooded vehicles during Hurricane Harvey had a significant effect on PURE’s total salvage last year.
PURE’s Combined Ratios
An insurer’s combined ratio measures losses and expenses against premium to help evaluate underwriting results. A combined ratio below 100 percent typically indicates profitability. However, a growing insurance company may show statutory underwriting losses even with a combined ratio under 100 percent. Management monitors three combined ratios to evaluate PURE’s operating performance.
Gross Combined Ratio
Indicates whether or not an insurer is collecting enough premium to cover its claims obligations and operating expenses prior to the cost/benefit of reinsurance.
Net Combined Ratio
Indicates profitability net of the cost/benefit of reinsurance. It reflects items included in the statutory P&L.
Adjusted Combined Ratio
Adjusts the Net Combined Ratio to reflect the benefit of member surplus contributions, which go directly to PURE’s balance sheet. We believe that this measure provides the most accurate picture of PURE’s claims-paying ability and overall economic performance in any given year.
PURE’s 2017 combined ratios, both with and without the impact of catastrophe-related claims, are presented below.
Loss Prevention Benefit
PURE’s Homeowners policy includes a $2,500 Loss Prevention Benefit, money that members can use to make their homes safer or better equipped to prevent a loss from recurring.
In 2017, we made 530 Loss Prevention Benefit payments, totaling over $1,200,000. Since the program began, over $3,800,000 has been invested to help make our members more resilient following a loss.
Costliest Causes of Loss
The chart below shows the six causes of loss across all lines of business that led to the greatest portion of the year’s total claim costs. These percentages reflect what PURE has paid or expects to pay on claims reported in 2017.
Water damage continues to be the costliest cause of loss among the PURE membership. This includes damage from events like burst pipes, roof leaks and overflow of household appliances (but not flood damage). Auto collision, while accounting for over one-third of PURE’s claims count, still cost the membership less in damages than water did.
Many of last year’s claims were also attributed to flooding, as Hurricane Harvey totaled hundreds of cars and caused significant damage to members’ homes. While a standard Homeowners policy does not cover losses caused by flooding, PURE offers a variety of flood solutions in most states. Speak to your independent broker to ensure you are properly covered.
*Includes claims covered by the NFIP but administered through PURE. | Average cost per claim reflects funds paid as well as on reserve as of 4.11.18.