The homeowners market took a hard hit in 2008—and it’s struggled to find its footing in the post-recession era, says Jerry Hourihan, executive vice president and chief marketing officer for AIG personal lines in the U.S. and Canada.

“I think if you look back at the last few years, the trends have not been great for the homeowners line,” Hourihan says. “It’s been far more catastrophe-prone than in prior years, and the variety of catastrophes has been higher than usual.”

But as the economy continues to rebound, opportunities abound for independent agents who are looking to sell more homeowners policies—especially to the high net-worth demographic.

Pricing Trends

Heading into 2014, “the industry is looking to improve performance,” Hourihan says. “What that means is we’re likely going to see continued rate taking as we did last year. Several carriers have announced increases in the mid- to high-single digit range.”

Paired with enhanced marketplace performance, the consistently improving U.S. economy will likely increase high net-worth homeowner spending. “Economic confidence, low interest rates and stability will generally encourage people to reach into their wallets,” says Jim Fiske, U.S. marketing manager for Chubb personal insurance. “What that usually foretells is an increase in folks’ investments in their existing home.”

Whether that involves additions, renovations or upgrades to a current property, those investments tend to “drive an increase in insurance to value,” says Fiske. “We’re also hopeful that we would see an increase in the purchase of secondary locations.”

Brian Milnamow, vice president of personal insurance product management at Fireman’s Fund Insurance Company, agrees that the high net-worth homeowners business is poised to expand. “The real estate market is rebounding, and therefore there will be additional sales opportunities for independent agents,” he says. “High net-worth customers in general will start having that expendable income again, and will be able to increase their investments in things like wine, jewelry and fine arts.”

On the Horizon

Hourihan notes that thanks to heightened cat activity in recent years, some carriers have taken to increasing both flat deductibles and specific peril deductibles. He adds that there’s “certainly no movement to increase coverage for catastrophe perils that are typically excluded,” such as flood or earthquake.

“For example, many carriers use wind deductibles or hurricane deductibles, and the fine print in those deductibles can mean an awful lot to a client,” Hourihan explains. “Oftentimes those are percentage deductibles as well, and clients aren’t often aware of what their true deductible is from a dollar standpoint until a loss occurs.”

What does that mean for independent agents? They’ll need to be “very aware of the impact of those changes to clients,” Hourihan says. “It puts a lot of pressure on agents to make sure homeowners understand what they’re covered for and not covered for, and how much they’re absorbing themselves.”

Additional coverage developments in the homeowners market are likely to include identity theft and cyber liability. “If someone’s daughter starts snarking on a friend via Facebook or Twitter, what is his responsibility as a parent? What if there’s a lawsuit?” Fiske asks. “Carriers that have a broader contract form than other mass-market carriers include personal injury on the liability product. That’s not the standard in the industry.”

Want tips on how to sell homeowners to high net-worth clients? Keep an eye on iamagazine.com and upcoming issues of News & Views.

Jacquelyn Connelly is IA assistant editor.