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Report: Home insurance rates not high enough

Posted On Mon, October 31, 2011

A recent report from Aon Benfield showed that many homeowners insurance policies may be sold at lower rates than they should.

The current return on equity is down to 4.8 percent in 2011, compared to last year's figure of 6.9 percent, according to the Homeowners ROE Outlook from the reinsurance intermediary. It is thought that returns for the current period will be 3.8 percent, which is down from 5 percent in the past. In addition, the prospective return on equity could be more than 6 percent, but still below last year's 6.9 percent.

"Great progress has been made across the homeowners’ insurance industry to more fully recover the cost of reinsurance over the past few years - a net cost that is generally lower than the cost of exposing an insurer’s own capital to catastrophic risk," said Bryon Ehrhart, chairman of Aon Benfield Analytics. "However, homeowners' insurers continue to maintain and expose significant capital to retained catastrophe risk."

Consumers may want to take advantage of low home insurance rates, as many insurance companies may be selling the coverage for less than they probably should.

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