As weather gets biblical, insurers stray
As weather disasters strike with additional frequency, homeowners first get hit with all the destruction or total decrease of property. Lots of people are then hit using the unexpected lack of home insurance policies as insurance agencies re-evaluate their financial liabilities.
After having a tornado ripped through Springfield, Massachusetts, not too long ago, R. Paula Lazzari’s home was badly damaged. The retired teacher found broken windows, missing siding along with a damaged roof. Her insurer provided to fund repairs for one broken window and some with the siding. It took nine months — and mediation services from an independent adjuster and the Massachusetts Division of Insurance — to get her bills paid, based on the parties involved.
In this era of unpredictable weather patterns, Lazzari’s case just isn’t unique. Insurance carriers are raising rates, cutting coverage, balking at some payouts and customarily shifting more expense and liability to homeowners, in line with reports in the industry and its particular critics.
“Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornados and floods nowadays,” the buyer Federation of America said in a statement after studying industry data.
The concedes it’s wanting to avoid getting trounced by those self same punishing weather patterns.
“Last year (2011) was an exceptional year for disasters,” said Michael Barry on the Insurance Information Institute (III), a niche trade group. “Insurers have got one step back to assess if they can absorb severe losses.”
STATES LEFT Inside COLD
Some insurance carriers have pulled out of weather-challenged states — meaning they’ll not write new homeowners policies and may not renew contracts with current policyholders.
Inside the wake of Hurricane Irene last summer, for instance, Allstate informed some 45,000 Nc policyholders it wouldn’t normally renew contracts which were not bundled with vehicle insurance.
After a spate of tornadoes last April caused $11 billion of property damage in Alabama, Alfa Mutual Group announced it wouldn’t renew 73,000 Alabama property insurance coverage.
“The increased frequency and seriousness of storms throughout the last decade have highlighted the necessity for Alfa to check its overall property portfolio,” Alfa President Jerry Newby said within a statement.
Florida, where insurers are actually dropping coverage since Hurricane Andrew in 1992, is a great one of where this may lead. With the annual average of $1,460 per home, homeowners’ premiums there are second-highest in the country (Texas, at $1,511 is first), based on the most up-to-date data available, a 2010 report through the Insurance Information Institute.
“Florida’s off the charts on the subject of pricing,” said Mike McCartin, an Ashton, Maryland, independent agent.
A state has stepped into cover some 1.5 million properties via its publicly funded Citizens Property and Insurance Corporation as insurers drop a lot more homes.
“You just have major private insurers which can be unwilling to write policies in Florida,” said Robin Westcott, the state’s insurance consumer advocate.
“It’s only a tough market to maintain,” said Phil Supple, a spokesman for State Farm, that has been once Florida’s largest property insurer. It stopped writing new homeowners’ policies there in 2007.
CHERRY-PICKING Of clients
Even though companies usually are not abandoning states any time they want, many choose to drop coverage on individual homes or customers that might seem prone to file claims. Insurers generally work on three-year contracts with homeowners, Barry said. At the conclusion of those contracts, insurers can choose to raise rates you aren’t renew.
When frozen pipes caused flooding in Phil Berger’s Ijamsville, Maryland, home not too long ago, he got a $6,000 check from Allstate for your damages — and a policy review. Berger said an Allstate contractor told him to generate $100,000 in repairs to his home at his expense or however lose his coverage. He refused, and instead found a lower priced policy which has a company that required only 1 smaller repair before since the home.
“You only need to be on your toes at all times,” Berger said.
Allstate declined to touch upon Berger’s case, but sent an email a reaction to general questions regarding the business’s nonrenewal policies.
“Allstate responsibly manages its risk by opting never to renew policies as warranted,” company representative Kevin smith wrote. “These actions are taken into consideration, and help ensure Allstate’s continued ability to give you a wide range of insurance products to consumers at a competitive rate, while remaining financially strong in every community we serve.”
PAYING MORE At a lower price
Even homeowners that renew every year could find new limits buried into their policies. The Consumer Federation report said insurance providers have “sharply empty the catastrophe coverage agreed to consumers” by raising deductibles, capping replacement costs, and — significant for people within the path of tornadoes and hurricanes — removing coverage for wind damage if another non-covered event (normally a flood) also occurs.
Industry groups say this misstates the details.
“The …(CFA) could hardly be a little more wrong,” said Dr. Robert P. Hartwig, president with the Insurance Information Institute. “Cities for example Tuscaloosa, Birmingham among others are increasingly being rebuilt today because of private insurance carriers paying losses — not from ‘hollowed out coverage’ policies.” Insurers have paid “literally billions” of dollars to “hundreds of a large number of claimants” troubled by natural disasters, he explained.
Hartwig also defended the practice by some insurance providers of leaving certain states or regions.
“If you know an insurance company that they can can’t raise rates despite nine hurricanes by 50 % years, obviously insurers will have to relieve exposure,” he was quoted saying.
But homeowners’ insurance fees have been rising sharply. They’ve got increased a typical 6.33 percent annually between 2002 and 2009, according to the National Association of Insurance Commissioners (NAIC). In 2010, insurers have asked for rate increases of 18 percent if not more in 11 states, in accordance with the Consumer Federation.
Robert Hunter, the writer on the consumer report, has questioned whether limit-laden policies are worth the increasing costs. But loan officers require property insurance, and anyone who has observed a devastating house fire or storm rarely is in able to go without coverage.