The September 2007 issue of Bloomberg Markets magazine has an article "Insurance Hoax" by David Dietz and Darrell Preston critical of home insurers. The article says that Allstate paid only 58% of home insurance premium income as claims in 2006, compared to 79% in 1996. Throughout the property-casualty industry, the payout ratio declined from 64% to 55% from 1996 to 2006.
Given such a big spread, I wonder how much sense it makes to forgo home insurance if possible, although that represents a big risk. Maybe a policy with a very high deductible (say $100K) would make sense for rich people. If one has a mortgage, typically home insurance is required.