How Insurtech Is Transforming the Homeowners Insurance Business Model

Homeowners insurance in the U.S. has historically operated on razor-thin margins, with underwriting losses averaging -1.6% over the past decade. While investment income has helped nudge total profits slightly positive at 0.7%, this line of business has often struggled to reach technical profitability. In fact, the market only returned to a combined operating ratio (COR) of 99.7% in 2024, indicating near-break-even performance. Despite the challenging economics, top-performing carriers have demonstrated that profitability is achievable through tighter loss control and cost efficiency.

Much of the industry’s cost—nearly 40% of premiums—is not paid out in claims, with 15 points of the combined ratio attributed to operating expenses like loss adjustment and general administration. Interestingly, when compared to other P&C lines, homeowners insurance is no more inefficient than personal auto, and is less expensive to operate than many commercial lines. AI-driven automation and insurtech efficiencies, while promising, may only marginally reduce the combined ratio due to limits on how much of those operating costs are personnel-related.

Instead, the most transformative opportunity lies in proactive loss prevention. Insurtech firms like Whisker Lab and Ondo are pioneering ‘connect and protect’ models aimed at preventing fires and water damage—two of the most costly and frequent perils in homeowners claims. Whisker Lab’s Ting device focuses on early detection of electrical fires, while Ondo’s LeakBot targets water leak prevention. Data from these programs show potential for dramatic claim reductions, with some insurers reporting 45–70% drops in water damage claim costs after implementation.

As these programs scale, large carriers like Nationwide and PURE are deepening integration with prevention technologies, expanding their reach to dozens of states. Ondo’s vision for 2035 paints a future where the connected home becomes a cognitive risk engine—an AI-powered environment that anticipates and mitigates losses before they occur. If realized, this evolution could finally shift homeowners insurance from a reactive model to a truly preventative one, unlocking long-term profitability and customer satisfaction in the process.