Every P&C agency needs to make their customers aware of the problems with the current TWIA funding, how it effects their premiums and to put pressure on their legislative representives to actually get something done. This may be the best chance we’ve had in years because of the number of storms that have occurred in the past year.
This is also a great opportunity to sell flood policies for coastal customers that thought they didn’t need it because the house was built on stilts.
Great advice, Kent. Thank you. So, in your opinion a larger role for the state in insurance is good for agents? I’m just a little concerned that other states may go down the road of FL and overextend themselves and the taxpayers while crowding out the private market.
David, that is not at all what I said. The current problem is the TWIA doesn’t buy enough reinsurance. As you know, this means the insurance carriers must reinsure the TWIA. Each carrier’s premium includes their portion of reinsuring the TWIA. Several problems:
First, insureds that don’t live close to the coast pay slightly higher premiums to help reinsure the TWIA. Second, a number of carriers are reluctant to enter the Texas market due to the mandatory participation in reinsuring the TWIA.
At last count, the coastal exposure was at least $65B. This would normally require a reserve of about $19.5B. The TWIA had less than $2B in reserves and reinsurance brought them up to about $3.5B. If the TWIA was an independent insurance carrier the TDI would sieze control of it for lack of adequate financial resources. The carriers must reinsure the remainder of the risk. The solution is for the TWIA to buy a LOT more reinsurance using the premiums they collect. True this will increase premiums a bunch for those coastal risks. I have several of my customers that live in Dallas but, have homes in tier 1. Even they agree that it isn’t right for the cost of their insurance to be subsidized by the carriers – who pass along the cost to their insured. If TWIA premiums went up enough then, it would be a good incentive for coastal insured to build more hurricane resistant structures. They would then be rewarded with premium credits for meeting higher construction standards. As it is now, there isn’t enough incentive for coastal insured to build better than current code – which could use improvement.
My point is that most of your insureds probably don’t know about how the unfunded TWIA is indirectly effecting their insurance premium. The only way they will find out is by reading the newspaper or from their agents.
Continued; I forgot to mention that if the TWIA would be managed like a normal insurance carrier then, their premiums would not be so aritifially low and the private market would be real competition for the TWIA.
Every P&C agency needs to make their customers aware of the problems with the current TWIA funding, how it effects their premiums and to put pressure on their legislative representives to actually get something done. This may be the best chance we’ve had in years because of the number of storms that have occurred in the past year.
This is also a great opportunity to sell flood policies for coastal customers that thought they didn’t need it because the house was built on stilts.
Great advice, Kent. Thank you. So, in your opinion a larger role for the state in insurance is good for agents? I’m just a little concerned that other states may go down the road of FL and overextend themselves and the taxpayers while crowding out the private market.
David, that is not at all what I said. The current problem is the TWIA doesn’t buy enough reinsurance. As you know, this means the insurance carriers must reinsure the TWIA. Each carrier’s premium includes their portion of reinsuring the TWIA. Several problems:
First, insureds that don’t live close to the coast pay slightly higher premiums to help reinsure the TWIA. Second, a number of carriers are reluctant to enter the Texas market due to the mandatory participation in reinsuring the TWIA.
At last count, the coastal exposure was at least $65B. This would normally require a reserve of about $19.5B. The TWIA had less than $2B in reserves and reinsurance brought them up to about $3.5B. If the TWIA was an independent insurance carrier the TDI would sieze control of it for lack of adequate financial resources. The carriers must reinsure the remainder of the risk. The solution is for the TWIA to buy a LOT more reinsurance using the premiums they collect. True this will increase premiums a bunch for those coastal risks. I have several of my customers that live in Dallas but, have homes in tier 1. Even they agree that it isn’t right for the cost of their insurance to be subsidized by the carriers – who pass along the cost to their insured. If TWIA premiums went up enough then, it would be a good incentive for coastal insured to build more hurricane resistant structures. They would then be rewarded with premium credits for meeting higher construction standards. As it is now, there isn’t enough incentive for coastal insured to build better than current code – which could use improvement.
My point is that most of your insureds probably don’t know about how the unfunded TWIA is indirectly effecting their insurance premium. The only way they will find out is by reading the newspaper or from their agents.
Continued; I forgot to mention that if the TWIA would be managed like a normal insurance carrier then, their premiums would not be so aritifially low and the private market would be real competition for the TWIA.