Wow tell them to come out to California where we have to buy quake insurance. I currently pay 2200 in premium just for the quake coverage, with a 10% deductible on a 300,000 house to I have the first 30,000 of cost.
All of these coverages are there, we need to cover them in every policy issued in the U S. eliminate the exclusions and cover in every state spread the risk that is the general principle of insurance. Wyoming would have to pay for quake and wind in their policies also, as would Minnisota, Wisconsin etc etc. Everybody pays into to program.
Broker Boy your comments sound like the failed logic of Obama care. Risk is what it is and the insured should pay based on the hazards present at the location. From what you are saying Homeowners rates should be flat across the country which is just wrong. Why should the folks who choose not to have quake coverage, which most folks in seismically quiet areas do unless they add the coverage to the standard HO policy, subsidize those who really need it????
Dear Say What: Obamacare analogy – seriously? Insureds in California have little need for wind, hail and related storm coverages they way they do in the midwest and south central states.
Yet Californians pay into it with little expectation that they will actually benefit from it. So the red states are already being subsidized by blue states. I don’t hear you whining about that.
This isn’t necessarily back at the preceeding comments, but here are some points about HO insurance:
Actually, HO insurance is priced for each state individually. This is partially because each state is regulated separately. This also helps account for differences in hazards. When a particular state is priced, it is further divided into territories to reflect the variation in risk within a state. This can reflect differences in weather risks in different areas of the state, differences in crime rate, etc.
Overall, HO is way underpriced. Most companies lose money on HO, but are willing to do so, in order to get the Auto, Life, etc business. The HO line is constantly “trying to play catch-up”. We hope to some day at least break even on HO. While there may be some isolated exceptions to this, this is pretty much the overall situation.
When it comes to subsidization, the largest subsidization is to all those who choose not to buy HO insurance, then they get the free handouts from FEMA, which we all pay for.
Celtica – You’re wrong about that. Every year the Santa Ana winds damage hundreds, sometimes thousands of homes in California. Also, California homeowner insurance is prices based on California risk, NOT hail in the midwest or hurricanes in Florida. So, sorry to blow your theory out of the water, but the only thing your blue state is subsidizing are your own social programs.
Broker Boy, you are not required to buy quake coverage. It comes as an option when you buy a homeowners or renters policy. It should be noted the California Earthquake Authority, while the major provider of the coverage in the state, does not have a monopoly on quake coverage with respect to HO insurance. It’s also ridiculous to state ‘all these coverages are there’. No, they aren’t and it kinda silly to have a person in say, Pennsylvania, buy quake coverage just to support your home.
“Greed of the industry,” huh? There’s an elephant in the room: if rates are so outrageous, if companies are really raking it in…why no stampede to enter these markets. Greed can be a big motivator, but tempered by the specter of cat losses. Yes, high premiums hurt, but they probably reflect the risk. Regulators can dress up the market, like tying a pork chop around the unruly child’s neck so the dog will play with him. But it doesn’t change the child, and it won’t change the risk of hurricane catastrophe.
Coastal living is a high risk choice. Someone must assume that risk. Assuming that risk yourself or paying someone else to do it is also a choice. I choose to live in a high risk state and therefore pay higher premiums than people in lower risk states because I am not willing to assume the risk myself. Sometimes choices have price tags, but at the end of the day it is still a choice.
How exactly do these people think their claims get paid when disaster strikes? To collect the cost at that time. Um no? duh. And by the way, companies, even insurance, are supposed to profit. Theyr’e a business. I’d hate to be insured by a company that doesn’t profit. That equals insolvency. hello
Great points Connie. I think the average person thinks that insurance companies have an endless supply of money (like the Federal Gov’t) and they keep every bit of premium they collect. Here’s some of the doozies I’ve heard over the years: What happen to all that money I’ve paid in over the years? And my all time favorite – Claims are just a write-off.
Anne: Although there are some socialist insurance programs such as Social Security most do not come close to meeting the definition:
: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2a : a system of society or group living in which there is no private property b : a system or condition of society in which the means of production are owned and controlled by the state
3: a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done
I would appreciate it if you would get your facts straight before spouting of just your opinion.
The lady in Deerfield Beach ‘short sold’ her rental properties because the insurance was too high? I highly doubt that was the reason. Sounds like she over extended herself. Wait until those homes that are rated prefirm on flood stop being subsidized by FEMA. Then we will have some screaming.
If you are dumb enough to build on the coast, you should pay higher premiums. State Farm didn’t leave FL after 50 years because they were making a profit. One large CAT can wipe out a decade of profits.
Why should anyone else pay because some fatcat wants to live where he can see the ocean? If you build there, you should pay the premiums and get over it. If you believe them to be too high, then don’t build/buy there. Pretty simple.
Everyone always wants to scream something is “unfair” in some way. We insure people in the Keys of Florida, yet those homeowners fully understood the risks involved in insuring their home when they bought there. Same goes for much of Harris County in Texas. The homeownes want to throw up the fact they haven’t had a claim in 8 years, but won’t bother to tell you in the two prior years they filed claims with a total of over $100,000 each. In insurance, you don’t rate for the risk based on a single year, or even a decade. You rate the risk based on past performance. We all know FL and TX WILL get hit again, so stop complaining your rates are too high based on just a few “good” years of weather.
Nothing you’ve written is inaccurate and homeowners need to pay more to live on the coast. But you know that not all waterfront is created equal. There’s some pretty run down places on or near the coastline and these people will not pay for or cannot afford the insurance bill. We’ll always bail-out a portion of these homeowners.
You are seeing the results of cat modeling based on the premise of Climate Change. If you are a believer, you can’t very well argue with insurers using the science. If you aren’t a believer, feel free to bitch and moan.
“Overall, coastal homeowners in 18 states along the Gulf and Atlantic pay about $4 billion more than inland residents for insurance against hurricane winds”
“It’s still unclear how the $19 billion in privately insured damages caused by Superstorm Sandy in October 2012 will hit policyholders.”
“It’s hard to see how the insurance companies can justify the kind of premiums we have to pay down here,” Virden said.
Furthermore, since 2004 we have had hurricanes Charley ($9 billion), Wilma ($12 billion), Ike ($13 billion), and Katrina ($47 billion). Added to Sandy’s $19 billion and that is 5 hurricanes costing over $100 billion in insured losses over a 8 year span. It sounds like the additional $4 billion a year currently charged to costal property owners is still too low.
Every area in our beloved country comes with its own set of hazards. There are flood prone areas, fire hazard areas, mud slide areas, earthquake areas, hurricane prone areas, and etc.. It is a state by state rating system. What burns me is when companies lose there behinds by over exposing themselves in a high risk area and then start throwing off customers in other areas to clear their books of older homes and the like to try to get there heads above water. Katrina nearly wiped out a few companies because they had so heavily written in the effective areas. And to try to come back from the losses they had to lose some of their less desirable risks that had been on the books for years without filing a single claim and are not in high risk areas. And because the market was flooded with older homes and mobile homes and the companies they were rewritten through got cold feet and cut us off from writing any owner occupied risk, now there are no markets. And now it depends on the company whether or not you are in a wind zone or not. I have one company that will not write new business in our county because we do not touch the Florida line. I have 3 more that say we are in the wind/hail zone for the wind pool when, I believe, there are only two counties Baldwin and Mobile that are truly considered eligible for the wind pool. We have lost the ability to write any personal lines through one brokerage because we are too close to Florida. Yet, they still have markets for Northern Alabama where the majority of the losses have come over the past 5 or so years. There needs to be some kind of reform, but I don’t know what it would be that can satisfy the companies, the customers, and the agents. But there needs to be consistency throughout a state at least.
Take the cat risk away from the private insurers and expand fEMmA to include Tornado, Hurricane, flood, earthquake, volcanic eruption, land slide and sink hole collapse. FEma should provide low deductibles and guaranteed replacement coverage for homes and acv for contents with the option to buy replacement. Lenders should require it to be purchased in every state. All premiums go into one pool of money, less then 10% administrative cost allowed. Leave the other perils to the private insurers to compete with. Consider having private insurers administer policies, so that customer’s can choose an agent to service claims and coverage.
Ed’s solution is to allow the rest of the country to pay for the decision to live in a dangerous area. Allow wealthy people who live along the coast to be supported by others.
10% Administrative charge? Where have you been? Most carriers have 30-35% operating overhead. And if you’re going to expect me to service the policy and claims aspects, I’m not going to do that without commission. You have a theory here that sounds just like the one we have now – insurance coverage for a multitude of risks for a price. Your suggestion will only make things more complicated for the homeowner and the claims adjudication process.
Charging more for costal home owners is a scam. The insurance companies think people with enough money to build on the coast wont complain about the rates. There is more risk in the heartland of America. Sure a once in a decade storm like Sandy is expensive but if you add the year after year disasters in the midwest with hail and tornados and the almost every year flooding of the Mississippi youll see insurance companies pay more for these CAT events than costal ones but there is no rush to raise rates on the non costal customers.
Rick,
There are certainly numerous mid west storms that increase the hazards in that region, what you fail to realize is that while the severity of these storms is in fact great the scop of damage is typically small by comparison to a hurricane. Typical tornado will do damage for a couple of miles max under normal circumstances whereas a hurricane will be hundred plus miles in width and have been none to cause damage for several hundred miles inland. As to your comment on flood while a common occurence most insurance policies exclude coverage for the peril and if coverage is needed it comes from the fema administered National Flood Program which is a government insurance program.
Do some carriers nail coastal risks with high rates and limited coverage, that is true but comparing middle of the country risks to coastal is like comparing a Mercede’s to a Kia.
Lets make easy compare the cost insurance companies paid in sandy around 18 billion mind you apprx 15 states were involved vs June 11, 2012 Dallas hail storm around 2 billion dollars.
Now that two billion was only for one city and one storm there are going to be at least a dozen to about 2 dozen hail storms in Dallas every year and were arent even talking all the other states and their hail storms, floods, or tornados.
I think it’s funny that we, a bunch of insurance folks, have turned a discussion of disaster preparedness into a contest of who is more stupid than whom for living in one place versus the other. I don’t consider a California resident any more stupid for living along the San Andreas fault line than I do someone in the Mississippi River Valley living along the New Madrid fault line. I don’t consider someone living on Long ISLAND any more stupid than someone living in New Orleans. It’s all relative. And telling someone they are stupid for living in any of those places isn’t exactly a solution, is it? I guess they should all just come live in your perfect Pleasantville neighborhoods.
Well Broker Boy is back, so sorry, but great comments all around but I still go back to my original comment, spread the risk everywhere. Now for those of you in La La land here is what happens. When an event occurs in a non hazardous area like buzzard breath IoIllaIndyPhyMin then quess what the areas that are in a hazardous area, their premiums go up to take care of the issue for the carriers that suffered in the non hazardous areas. Asking why are your premiums going up, we got hit hard in buzzard breath wherever and reinsurance is now higher for us and we have to recoup.and all you insurance folk know this happens it is the same story. By the way I like Ed comments. Spread the risk!!!
Not an option. State law requires rates to be based upon the risk in that state. Politicians understand that their constituents will not appreciate subsidizing other areas; therefore, these laws will not be changed.
Wow tell them to come out to California where we have to buy quake insurance. I currently pay 2200 in premium just for the quake coverage, with a 10% deductible on a 300,000 house to I have the first 30,000 of cost.
All of these coverages are there, we need to cover them in every policy issued in the U S. eliminate the exclusions and cover in every state spread the risk that is the general principle of insurance. Wyoming would have to pay for quake and wind in their policies also, as would Minnisota, Wisconsin etc etc. Everybody pays into to program.
Broker Boy your comments sound like the failed logic of Obama care. Risk is what it is and the insured should pay based on the hazards present at the location. From what you are saying Homeowners rates should be flat across the country which is just wrong. Why should the folks who choose not to have quake coverage, which most folks in seismically quiet areas do unless they add the coverage to the standard HO policy, subsidize those who really need it????
Dear Say What: Obamacare analogy – seriously? Insureds in California have little need for wind, hail and related storm coverages they way they do in the midwest and south central states.
Yet Californians pay into it with little expectation that they will actually benefit from it. So the red states are already being subsidized by blue states. I don’t hear you whining about that.
This isn’t necessarily back at the preceeding comments, but here are some points about HO insurance:
Actually, HO insurance is priced for each state individually. This is partially because each state is regulated separately. This also helps account for differences in hazards. When a particular state is priced, it is further divided into territories to reflect the variation in risk within a state. This can reflect differences in weather risks in different areas of the state, differences in crime rate, etc.
Overall, HO is way underpriced. Most companies lose money on HO, but are willing to do so, in order to get the Auto, Life, etc business. The HO line is constantly “trying to play catch-up”. We hope to some day at least break even on HO. While there may be some isolated exceptions to this, this is pretty much the overall situation.
When it comes to subsidization, the largest subsidization is to all those who choose not to buy HO insurance, then they get the free handouts from FEMA, which we all pay for.
Celtica – You’re wrong about that. Every year the Santa Ana winds damage hundreds, sometimes thousands of homes in California. Also, California homeowner insurance is prices based on California risk, NOT hail in the midwest or hurricanes in Florida. So, sorry to blow your theory out of the water, but the only thing your blue state is subsidizing are your own social programs.
Broker Boy, you are not required to buy quake coverage. It comes as an option when you buy a homeowners or renters policy. It should be noted the California Earthquake Authority, while the major provider of the coverage in the state, does not have a monopoly on quake coverage with respect to HO insurance. It’s also ridiculous to state ‘all these coverages are there’. No, they aren’t and it kinda silly to have a person in say, Pennsylvania, buy quake coverage just to support your home.
“Greed of the industry,” huh? There’s an elephant in the room: if rates are so outrageous, if companies are really raking it in…why no stampede to enter these markets. Greed can be a big motivator, but tempered by the specter of cat losses. Yes, high premiums hurt, but they probably reflect the risk. Regulators can dress up the market, like tying a pork chop around the unruly child’s neck so the dog will play with him. But it doesn’t change the child, and it won’t change the risk of hurricane catastrophe.
Nice analogy Tom. I will have to go home tonite and try that on my 12yr old and see if the dog will chase him.
Oh, one more thing. Is it a raw pork chop or a cooked one? I don’t think the dog will care one way or the other. Just want to make sure I do it right.
simple economics the cost associated with entering the insurance market are huge. thats why there is no stampede to enter the market.
Coastal living is a high risk choice. Someone must assume that risk. Assuming that risk yourself or paying someone else to do it is also a choice. I choose to live in a high risk state and therefore pay higher premiums than people in lower risk states because I am not willing to assume the risk myself. Sometimes choices have price tags, but at the end of the day it is still a choice.
How exactly do these people think their claims get paid when disaster strikes? To collect the cost at that time. Um no? duh. And by the way, companies, even insurance, are supposed to profit. Theyr’e a business. I’d hate to be insured by a company that doesn’t profit. That equals insolvency. hello
Great points Connie. I think the average person thinks that insurance companies have an endless supply of money (like the Federal Gov’t) and they keep every bit of premium they collect. Here’s some of the doozies I’ve heard over the years: What happen to all that money I’ve paid in over the years? And my all time favorite – Claims are just a write-off.
Don’t you just feel soooo sorry for those people that have to pay such high rates?? (Along with everyone else!!) Just ask them.
Yeah, it must be tough for some people, having to live in a mansion on the beach.
I’ll bet he’s a liberal. Let the government subsidize everything. Or better yet, pay for the whole thing.
Bite your tongue! Don’t say that or some fool will try to make it happen.
Sounds more like a teabagger. Wants everything but doesn’t want to pay for it.
Insurance is a socialist program. Next time think about what you post;)
Anne: Although there are some socialist insurance programs such as Social Security most do not come close to meeting the definition:
: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2a : a system of society or group living in which there is no private property b : a system or condition of society in which the means of production are owned and controlled by the state
3: a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done
I would appreciate it if you would get your facts straight before spouting of just your opinion.
Why Not beat me to the punch. I’m slacking on my IJ lurking.
The lady in Deerfield Beach ‘short sold’ her rental properties because the insurance was too high? I highly doubt that was the reason. Sounds like she over extended herself. Wait until those homes that are rated prefirm on flood stop being subsidized by FEMA. Then we will have some screaming.
If you are dumb enough to build on the coast, you should pay higher premiums. State Farm didn’t leave FL after 50 years because they were making a profit. One large CAT can wipe out a decade of profits.
Why should anyone else pay because some fatcat wants to live where he can see the ocean? If you build there, you should pay the premiums and get over it. If you believe them to be too high, then don’t build/buy there. Pretty simple.
Everyone always wants to scream something is “unfair” in some way. We insure people in the Keys of Florida, yet those homeowners fully understood the risks involved in insuring their home when they bought there. Same goes for much of Harris County in Texas. The homeownes want to throw up the fact they haven’t had a claim in 8 years, but won’t bother to tell you in the two prior years they filed claims with a total of over $100,000 each. In insurance, you don’t rate for the risk based on a single year, or even a decade. You rate the risk based on past performance. We all know FL and TX WILL get hit again, so stop complaining your rates are too high based on just a few “good” years of weather.
Nothing you’ve written is inaccurate and homeowners need to pay more to live on the coast. But you know that not all waterfront is created equal. There’s some pretty run down places on or near the coastline and these people will not pay for or cannot afford the insurance bill. We’ll always bail-out a portion of these homeowners.
You are seeing the results of cat modeling based on the premise of Climate Change. If you are a believer, you can’t very well argue with insurers using the science. If you aren’t a believer, feel free to bitch and moan.
These three lines put together crack me up…
“Overall, coastal homeowners in 18 states along the Gulf and Atlantic pay about $4 billion more than inland residents for insurance against hurricane winds”
“It’s still unclear how the $19 billion in privately insured damages caused by Superstorm Sandy in October 2012 will hit policyholders.”
“It’s hard to see how the insurance companies can justify the kind of premiums we have to pay down here,” Virden said.
Furthermore, since 2004 we have had hurricanes Charley ($9 billion), Wilma ($12 billion), Ike ($13 billion), and Katrina ($47 billion). Added to Sandy’s $19 billion and that is 5 hurricanes costing over $100 billion in insured losses over a 8 year span. It sounds like the additional $4 billion a year currently charged to costal property owners is still too low.
Every area in our beloved country comes with its own set of hazards. There are flood prone areas, fire hazard areas, mud slide areas, earthquake areas, hurricane prone areas, and etc.. It is a state by state rating system. What burns me is when companies lose there behinds by over exposing themselves in a high risk area and then start throwing off customers in other areas to clear their books of older homes and the like to try to get there heads above water. Katrina nearly wiped out a few companies because they had so heavily written in the effective areas. And to try to come back from the losses they had to lose some of their less desirable risks that had been on the books for years without filing a single claim and are not in high risk areas. And because the market was flooded with older homes and mobile homes and the companies they were rewritten through got cold feet and cut us off from writing any owner occupied risk, now there are no markets. And now it depends on the company whether or not you are in a wind zone or not. I have one company that will not write new business in our county because we do not touch the Florida line. I have 3 more that say we are in the wind/hail zone for the wind pool when, I believe, there are only two counties Baldwin and Mobile that are truly considered eligible for the wind pool. We have lost the ability to write any personal lines through one brokerage because we are too close to Florida. Yet, they still have markets for Northern Alabama where the majority of the losses have come over the past 5 or so years. There needs to be some kind of reform, but I don’t know what it would be that can satisfy the companies, the customers, and the agents. But there needs to be consistency throughout a state at least.
Take the cat risk away from the private insurers and expand fEMmA to include Tornado, Hurricane, flood, earthquake, volcanic eruption, land slide and sink hole collapse. FEma should provide low deductibles and guaranteed replacement coverage for homes and acv for contents with the option to buy replacement. Lenders should require it to be purchased in every state. All premiums go into one pool of money, less then 10% administrative cost allowed. Leave the other perils to the private insurers to compete with. Consider having private insurers administer policies, so that customer’s can choose an agent to service claims and coverage.
This will solve the problem.
Ed’s solution is to allow the rest of the country to pay for the decision to live in a dangerous area. Allow wealthy people who live along the coast to be supported by others.
Right because the government is so good at providing for us now.
10% Administrative charge? Where have you been? Most carriers have 30-35% operating overhead. And if you’re going to expect me to service the policy and claims aspects, I’m not going to do that without commission. You have a theory here that sounds just like the one we have now – insurance coverage for a multitude of risks for a price. Your suggestion will only make things more complicated for the homeowner and the claims adjudication process.
Not unless the rates reflect the risk. Otherwise, it’s exactly like the flood program that isn’t working now.
Charging more for costal home owners is a scam. The insurance companies think people with enough money to build on the coast wont complain about the rates. There is more risk in the heartland of America. Sure a once in a decade storm like Sandy is expensive but if you add the year after year disasters in the midwest with hail and tornados and the almost every year flooding of the Mississippi youll see insurance companies pay more for these CAT events than costal ones but there is no rush to raise rates on the non costal customers.
Rick,
There are certainly numerous mid west storms that increase the hazards in that region, what you fail to realize is that while the severity of these storms is in fact great the scop of damage is typically small by comparison to a hurricane. Typical tornado will do damage for a couple of miles max under normal circumstances whereas a hurricane will be hundred plus miles in width and have been none to cause damage for several hundred miles inland. As to your comment on flood while a common occurence most insurance policies exclude coverage for the peril and if coverage is needed it comes from the fema administered National Flood Program which is a government insurance program.
Do some carriers nail coastal risks with high rates and limited coverage, that is true but comparing middle of the country risks to coastal is like comparing a Mercede’s to a Kia.
Rick, your statement is too general and has no data to back up your point.
Lets make easy compare the cost insurance companies paid in sandy around 18 billion mind you apprx 15 states were involved vs June 11, 2012 Dallas hail storm around 2 billion dollars.
Now that two billion was only for one city and one storm there are going to be at least a dozen to about 2 dozen hail storms in Dallas every year and were arent even talking all the other states and their hail storms, floods, or tornados.
I had no idea there were 2 dozen, $2b hail storms every year in Dallas. I guess you’ve convinced me.
I think it’s funny that we, a bunch of insurance folks, have turned a discussion of disaster preparedness into a contest of who is more stupid than whom for living in one place versus the other. I don’t consider a California resident any more stupid for living along the San Andreas fault line than I do someone in the Mississippi River Valley living along the New Madrid fault line. I don’t consider someone living on Long ISLAND any more stupid than someone living in New Orleans. It’s all relative. And telling someone they are stupid for living in any of those places isn’t exactly a solution, is it? I guess they should all just come live in your perfect Pleasantville neighborhoods.
Maybe stupid is too harsh. However, to expect their rates to not reflect the risk of damage to their homes is not smart.
Also, I just realized how preachy I sounded. Sorry about that. Didn’t mean it quite like that.
Oh well, like Forest Gump says, Stupid is, Stupid does!
Well Broker Boy is back, so sorry, but great comments all around but I still go back to my original comment, spread the risk everywhere. Now for those of you in La La land here is what happens. When an event occurs in a non hazardous area like buzzard breath IoIllaIndyPhyMin then quess what the areas that are in a hazardous area, their premiums go up to take care of the issue for the carriers that suffered in the non hazardous areas. Asking why are your premiums going up, we got hit hard in buzzard breath wherever and reinsurance is now higher for us and we have to recoup.and all you insurance folk know this happens it is the same story. By the way I like Ed comments. Spread the risk!!!
Not an option. State law requires rates to be based upon the risk in that state. Politicians understand that their constituents will not appreciate subsidizing other areas; therefore, these laws will not be changed.