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Ed Noonan's avatar

Inflation in insured loss can’t be compared to general rates of inflation. In addition to the reasons you cite costs post-event are significantly affected by localized demand surge (cost of plywood, etc.), labor and material availability. There is also a significant influence in the post 2017 period arising from the increased involvement of public adjusters by claimants and litigation. This leads to larger claims ( i.e, replacing entire roofs rather than the damaged portion, etc.) and also some fraud. Some states have attempted to control this “social inflation”, but the increase in loss adjustment expense is a meaningful driver of overall loss cost inflation.

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Max's avatar

According to the Shiller Home Price Index, home prices have increased about 50% since 2019 (~210 -> ~320; 110/210 ~ 52%). Some of the increase is from increased land value, but most of it should be from the actual building/structure.

https://fred.stlouisfed.org/series/CSUSHPISA

Looking at the CPI estimate of home insurance increases, the increase is < 10% (much less than the 31% figure in example 3).

https://fred.stlouisfed.org/series/CUUR0000SEHD

CPI also estimates home price inflation to be less than Shiller (~25% vs. Shiller's 50%):

https://fred.stlouisfed.org/series/CPIHOSNS

It would seem First Street's conclusions are predetermined, and the underlying statistics are rather dubious.

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