Insurers have long contemplated exiting the homeowners line of business because it's historically unprofitable. Recently, Allstate's CEO, Tom Wilson, said the carrier considered vacating the homeowners market after the 2005 hurricane season. However, consumers have demonstrated their desire to bundle insurance coverage, and Allstate ultimately realized that not offering both auto and home was too big of a competitive disadvantage. Recent studies show that homeowners is growing in both policies and premium, yet the industry has only experienced four years with combined ratios below 100 since 1990.

The trends we've seen develop in auto—like online consumer shopping and increasingly sophisticated uses of data and analytics—are starting to take hold in homeowners, and now insurers have to tangle with complex market dynamics while simultaneously trying to boost underwriting profitability. As online shopping gains momentum, pricing competition will heat up, acquisition costs will increase, and retention rates will take a hit. If you don't have the resources of a Top 20 insurer, this may represent a fundamental shift in how you run your business.

All things considered, 2014 is a pivotal year in terms of how the homeowners industry will turn around historically poor results. There is significant innovation occurring now to propel underwriting and pricing strategies forward while things are relatively stable. You don't want to fall behind when severe weather wreaks havoc on loss ratios…again.