Issue No. 1 | April 7, 2026

For warranty administrators who manage loss ratios, reinsurance, and contract performance.

This Week: Home Warranty

THE CLAIM COST SIGNAL

HVAC and refrigeration repair costs increased 49.2% since 2020, per the Bureau of Labor Statistics — nearly double headline inflation of 25.8% over the same period and well ahead of wage growth at 30.2%. The median U.S. home is now 41 years old, an all-time high. In 2025 alone, 5.7 million homes crossed the 15-year threshold — the age at which major systems begin failing at meaningfully higher rates. The homeowners holding your open contracts are living in those houses.

THE UNDERWRITING ANGLE

If your HVAC severity assumptions haven’t been updated since you built your pricing model in 2022 or earlier, your reported loss ratio is understated. Not slightly — materially. A repair that cost $2,000 in 2020 now costs approximately $2,984 on average. If your earnings curve is producing a loss ratio of 60%, the corrected number using current severity may be closer to 68–70%. You are not managing risk. You are managing the appearance of risk.

This matters most for contracts in years two and three of their term, when HVAC claims peak. Contracts written in 2023 and 2024 are entering that high-severity window right now, priced against a cost structure that no longer exists. Running your open contract book against current BLS repair cost data before Q2 pricing reviews is not optional — it is the difference between a reserve that holds and one that doesn’t.

One additional signal worth tracking: average annual home maintenance costs reached $10,867 in Q2 2025 (Thumbtack). Homeowners increasingly understand their financial exposure. That is good for new sales volume. It also means the claims they file will be legitimate, well-documented, and at current market rates.

FROM THE BLOG

The $39 Billion Home Warranty Opportunity: What DTC Marketers Need to Know

• The U.S. DTC home warranty channel reached $2.7B in sales in 2025, growing at a 5.2% CAGR since 2020.
• The market remains materially underpenetrated: an estimated $39B opportunity if every eligible homeowner carried coverage; roughly 80M homeowners currently have no warranty.
• DTC economics are structurally attractive vs. real estate channel: 36-month terms, ~$4,500 average contract value, and 70%+ renewal rates.
• Key demand drivers to watch: aging housing stock (median home age 41 years), rising repair costs (HVAC/refrigeration +49% since 2020), and thin savings buffers (about 35% of homeowners with < $1,000 saved for repairs).

Source: Colonnade Advisors whitepaper on the drivers of M&A in the home warranty industry (as summarized in the blog post).

THE RESERVE QUESTION

What HVAC severity assumption is embedded in the contracts you wrote in Q1 2026? If answering that requires opening a spreadsheet and doing manual math, that is not a data problem. That is an earnings curve problem — and it compounds with every new contract you write at the wrong number.

If you’re reviewing your Q1 loss ratios and want a second set of eyes on your methodology contact us here.