Cause and Effect
As the saying goes – for every action, there is an equal and opposite reaction. One of the most popular questions we get is: Why?
- is my premium so high?
- am I being non-renewed/cancelled?
- did my renewal increase so much?
So, how did we get here? What are the causes behind these current insurance trends? It comes down to a few things: increased claims litigation, hurricane and storm claims steadily rolling in, and rising reinsurance costs.
Litigation is a huge issue in Florida. “According to National Association of Insurance Commissioners (NAIC) data mined by the Florida Office of Insurance Regulation, while Florida homeowners insurance claims accounted for just over 8% of all homeowners claims opened by U.S. insurers in 2019, homeowners insurance lawsuits in Florida accounted for more than 76% of all litigation against insurers nationwide.” Increased claims costs due to litigation is causing rates in the industry to skyrocket.
Reinsurance is basically insurance for insurance companies. With higher claims costs and higher loss ratios (amount of claims filed), the reinsurance rates have increased. These higher operating costs for insurance companies are spread out and passed along to consumers. In order to stay viable, carriers have had to make many, many changes.
Policy Cancellations & Non-Renewals
In the last few months, we have seen carriers process massive cancellations in Florida. Three home insurance carriers dropped more than 50,000 policies in Florida alone in the past few months. Along with cancellations, we are seeing many carriers process Non-Renewals for “Exposure Management.”
Carriers are having to re-evaluate their risks and reduce exposure in certain areas. If the carrier issues a cancellation or non-renewal to a policy, they send a notice by mail to the insured – it is vital that any and all mail coming from your insurance carrier is opened and reviewed immediately.
At every renewal, it is expected that there most likely will be an increase in premium. Unfortunately, we very rarely ever see home insurance premiums decrease or even stay the same. As our homes age, the risks can become greater with older systems like our plumbing, HVAC, roofs, electrical, etc. Home insurance carriers have internal systems and algorithms that rate our risks based on historical data collected.
Recently, we have seen much higher than normal rate increases. We have had many clients whose premiums have tripled or more, which has been unheard of in prior years. The insurance market is trying to balance itself. Many carriers who initially provided very low rates are having to dramatically increase rates due to high claims costs, litigation costs, increased reinsurance costs.
With what we’ve seen happening, along with a few carriers going out of business in the last few years, it is more important than ever to make sure if you are shopping your policy, that you check the financial stability of the carriers you have been quoted with. This is extremely important to Dennis and he makes sure to keep an eye on this for the carriers we write with. We share this information with our clients so they can make an educated and well-informed decision. Your home is likely to be one of your biggest purchases and assets – we want to make sure you are informed and protected!
Not only have our premiums been affected by what’s going on right now – so has underwriting. Underwriting is basically a process that insurance companies use to determine if they will offer a quote by evaluating different risk factors. These “Underwriting Guidelines” will vary from one insurance carrier to another. They look at many different details like – age of roof, type of plumbing, age of water heater, claims history, occupancy, and much more. Our job as your agent is to verify all of these important details so we can properly match you with insurance carriers to quote.
A big issue right now in the Florida home insurance industry is roofs. A few years ago, many insurance carriers would take roofs up to 20 years old. Most carriers have tightened this requirement- many carriers have limited the accepted age of roof to 10 or 12 years.
They also look at the condition of the home to make sure it is being cared for and maintained. Once a new policy is written, carriers typically conduct an inspection to make sure the home meets their guidelines. They have become a lot more strict about the condition of homes. They will send out requests for repairs for things like peeling paint, wood rot, cracked window, driveway cracks, etc. It is imperative if you are searching for a new policy, that you make sure your home is in tiptop shape!
Carrier Closures and Financial Stability
Gulfstream Insurance was ultimately declared insolvent and shut down at the end of August. Earlier this year, we also saw American Capital Assurance Corporation meet the same fate.
This is why it is vital when choosing an insurance company to make sure that they are strong financially. Not all insurance companies are the same. A $200 difference in premium between quotes may be negligible when comparing the difference in how the companies operate. We have home insurance to protect us in catastrophic events, so we need them to be there when there is a legitimate claims scenario!
When is the best time to shop?
Generally speaking, the best time to shop your policy is at your renewal. Renewal offers are usually sent about a month or two prior to your renewal date – to give you time to review the policy and make any changes, if needed.
Again, it is imperative that any mail or email received from your insurance carrier is opened immediately. Shopping insurance policies takes time, especially in our current market. As an agency, we try to do as much preliminary underwriting as we can to match you with a carrier. Sometimes, inspections are also required. Carriers are also doing underwriting reviews before AND after a policy is written. Time is definitely an important factor as shopping takes more time and effort in this climate, with all of the changes in underwriting.
Please be sure to review your renewal offer when you receive it and reach out to us soon with any questions, concerns, or shopping requests. With massive rate increases, as well as mass cancellations and non-renewals, we are working as quickly as we can to get back to everyone in a timely matter. We are having to date prioritize in order to avoid any lapses. We truly appreciate your patience and understanding as we devote our concentration and time to each client and file that they deserve.
We Are Here for You!
With all of these changes being implemented, we are hoping to see the industry stabilize. We believe there may be some time before we see this still but we are here every step of the way for our clients.
Please remember, not all insurance agencies, insurance quotes, and insurance companies are built the same. We take our responsibility to educate our clients seriously. We want to help guide you as best we can. We want to provide quotes that will meet your budget but also make sure it protects YOU!