December 11, 2020
Why Are Homeowners Insurance Rates Increasing?
With everything else happening this year, policyholders nationwide are receiving notices from their carriers and wondering, “why are homeowners insurance rates increasing?” We know it can be confusing and frustrating, so let’s walk through it together. There are a few driving forces behind the rate increase, such as claims, lawsuits, natural disasters, and the significantly increased cost of reinsurance.
What do Claims, Lawsuits, and Natural Disasters Have In Common?
The leading causes driving the current rate increases are a large number of lawsuits and home insurance claims being filed, whether they’re valid or not. For example, in 2019, Florida didn’t see a major storm. However, hundreds of lawsuits continue to be filed every week for Hurricane Irma, which occurred three years ago. Aside from that, the number of lawsuits against Florida insurance companies is increasing in general.
This year, around 150,000 lawsuits were filed against Florida insurers compared to 92,000 in 2019 and 45,000 in 2018. That’s a huge jump. Last year, 60 Florida property and casualty insurers reported a loss of $700 million. This year, we’re on pace to hit $1 billion (Jack Lowenstein). All of these lawsuits and losses mean insurance rates rise for everyone. Some things we can’t control, unexpected things happen, and natural disasters are… natural.
However, there has been a trend of fraudulent claims and lawsuits; this is something we can try to stop together. Door to door roofers are notorious for roaming neighborhoods, luring unsuspecting consumers with the promise of a new roof and no deductible; “just sign here!” They are trying to get you to sign an AOB, a written legal contract between you and another party wherein you transfer specific rights granted to you under your policy over to the contractor.
While many reputable entities utilize AOBs, these forms are widely abused and broadly written, in some cases giving away ALL OF YOUR RIGHTS under the insurance policy. AOBs are also commonly used by unscrupulous vendors to inflate damages and the cost of a claim. Always be suspicious of anyone that offers to present a claim to your carrier on your behalf.
What Is Reinsurance? Why Does It Affect My Insurance Rate?
So what is reinsurance? Reinsurance is insurance that an insurance company purchases from another insurance company to protect itself from the risk of a major claims event. This coverage must be purchased every year and helps to bear the brunt of the risk of a catastrophic event, such as a hurricane.
This year, reinsurance rates on average soared 20%-50%; this affected insurance providers nationwide. Even Bankers, with our 44-year history of timely claims handling, was not immune to the significant industry-wide reinsurance rate increases and the extraordinary weather losses from the 2020 Hurricane Season. As a result, insurance providers were forced to put these price adjustments into their products. While these price adjustments come when many are looking for ways to cut costs and expenses, market forces require insurance providers to make these adjustments quickly.
When Should I File A Home Insurance Claim?
The big question is, “when should I file a home insurance claim?” Insurance is purchased to help balance the cost of major expenses if something unexpected should happen. If something unexpected does happen, it’s good practice to ask yourself if the event is a standard home maintenance expense or a major event. Do you have a leak in your plumbing? Or did the pipe burst causing thousands of dollars worth of damage? If you’re unsure if you should file a claim, you can always contact your agent with any questions. Your agent is an important resource you can trust.
We hope we were able to explain the current climate in the insurance industry. With the new year coming up and many of us working on our homes this past year, it may be a good idea to reevaluate your current insurance policy. Check out our quick blog on when and why you may want to update your homeowners policy.