Hidden Insurance Opportunities in New Remodeling Numbers Exposed


Recently on a hunch, we compared residential new construction and residential remodeling construction numbers over the lifecycle of the recent housing crisis. We suspected a lingering inequality trend between the two, and we found some pretty staggering results. For our study, we looked at just over thirty-seven million residential properties.



The hunch proved out and showed a significant disparity in both the rate of the decline and the length of the trough. (There was a collective gasp in the office, and we knew we couldn’t keep this to ourselves.)

Home additions, remodel, and alterations (ARAs) took a considerably smaller dip after the housing market downturn when compared to new home construction permits. At its trough, residential remodels took a 30.9% haircut compared to their pre-housing crisis numbers.


Now, that is a lot…

But the decline in new residential construction permits pulled was profoundly steeper. It went through the floor during the crisis. There was a staggering 69.8% decrease between August 2005 and August of 2009.

However, the most interesting finding was that residential new construction permits have still not returned fully to the peaks of 2005 – not even close. The US market is currently 56.4% below pre-recession levels. Conversely, ARAs closed the gap and are now over their previous highs – sitting at 4% above pre-crisis levels.


Boiled down:

  1. New home construction permits dove 69.8% after 2005 and are still at 56.4% below pre-crisis peaks, recovering only 26%.
  2. ARAs took a 30.9% hit after 2005, but have made up the difference and gained ground by 4.1% when compared to pre-crisis peaks, recovering a whopping 104%.

remodel_vs_new_constructionThe two points from above tell us this: New home construction permit activity is still far below 2005 levels. ARA permit activity has made a comeback and even surpassed 2005 peaks, contrariwise.

And that leads us to this: ARAs are simply less volatile than new home construction.

Our newly confirmed hunch spawned a discussion. And Dan Kenney, our Senior Director of Business Development, opened our internal meeting about the results. He brought up these important points:

“There’s a lot of media focusing on new construction. […] However, residential remodeling is what’s really going on at the ground level. That’s what this look into the data just showed us in a big way.

And there’s a huge opportunity with residential remodeling! […] Focusing on it gives a great chance for carriers to have insights and know how they’re going to find growth in this modern market.”

Sefton, our VP of Product, interjected:

“Yes. Over the last year, we’ve seen the industry pay more and more attention to ARAs for policy monitoring to better support customers. We see the industry wake up to this need. […] Plus, pre-selecting risk all the way at the marketing end of the funnel is a strategy whose time has come.”

But Holly, our CEO, felt less positive about the industry’s current customer support. She added this:

“I recently did a major remodel to my home. […] We had to coordinate renter’s insurance on an apartment while we moved out of our home. And there was confusion over whether or not belongings left at the house had coverage. Both hurdles were very opaque and challenging.

The carrier didn’t come up with and share a solution for the remodeling portion of our customer lifecycle and, given the numbers we’ve seen in this study, we are not unique. Lots of people are remodeling and updating properties. […] We should accept remodels as a common occurrence in the housing stock lifecycle, especially since we may have a large and growing aging housing stock. […] There’s an opportunity for carriers to be the company that supports you all the way through the process.”

Holly also added one more note:

“Given that we are looking at more than a decade of data, the strong ARA numbers as compared to the new construction numbers may be the new norm. That is to say, the ARA segment is more resilient and less volatile than new home construction.”

For insurance carriers, this opens the door to several crucial questions:

Are there existing or new insurance product offerings which could be used to support customers better during an ARA process?

The industry is paying more attention to ARAs, as Sefton mentioned. But as Holly added, this may not be translating into the customer’s experience; they seem to be still feeling pain points. This leads to the next question…

Should insurance be monitoring for these changes in structures to gain a competitive advantage and meet customers where they are?

There may be a value add opportunity in proactively monitoring for change. It could further an experience of care. That could be the moment loyalty is earned, and the relationship solidified.

By ignoring this trend, is a blind eye being turned to unnecessary and unwanted churn?

Once engaged in the process of untangling coverage for an ARA process it’s not much more effort to shop around. A dry, transactional, and frustrating experience could open the door. But this isn’t just churn. This is churn on policyholders actively maintaining and improving their house–thus a better risk.

What is the industry doing to address this evolution in the housing stock?

There’s another story here too: We have an aging and unevenly maintained housing stock. This is the segment where we do not see remodeling or recent maintenance.

But how much loss risk does it pose? We’ll share our insights soon.

In the meantime, we’d be happy to discuss this trend, its implications in more detail, and what you can do to turn this to your group’s advantage.