What a travesty! These companies have no problem taking your money, but when it comes time for them to do what they’re in the business of doing, they bail!
funny, bailing when customers have paid into their pockets and they profited… now that they have lost money, they want to leave… so basically, they did not put enough money aside for these types of claims… another hurricane or hail storm and then what? they going to leave the state altogether? um..
On the surface, this seems to be another example of my pet peeve: the insurance industry is dominated by leaders who understand finance, cash flow, and the time value concept of money, but lack understanding of risk and risk analysis. To make matters worse, there appears to be inadequate reinsurance purchases to help offset these large losses. Still, it wouldn’t be the first time I was wrong. End of lecture.
The US homeowners market hasn’t made money 21 of the last 22 years and carriers aren’t not-for-profit organizations. How long should they keep taking it on the chin before reacting?
Carriers responded to the last soft market by going to far – too much coverage in places they had no business writing (i.e. the coast and other disaster-prone areas) and they did so at irrational prices. Shame on the industry for succumbing to the pressure to write business that was priced poorly for the risk.
But, the agency base also bears responsibility.
As I noted above, property insurance is a big-time money loser for two decades. In 2011 the industry lost somewhere between 25 and 50 cents on the dollar, but property results were MUCH worse, losing somewhere between 75 and 100 cents on the dollar. The math on that – for every dollar of property premium they took in, they spent $1.75 to $2.00 settling claims. That’s like making $100,000 a year but spending $175,000 to $200,000 a year. You can’t sustain a business like that, period.
Auto profits are much stronger than property results, though not strong enough to absorb 75 to 100 cents on the dollar of losses. Carriers are requiring supporting auto business to try to off-set property losses and stabilitize profits. Agents contribute to this issue because they often split accounts, putting the home with one carrier and putting the auto with a carrier that offers only an auto market. The result? They’re rewarding the companies that take on only the most profitable business, which hurts the carriers trying to offer a comprehensive lineup of products. If you understand pricing, you’ll know that only worsens the profit issues.
Complicating all of this is that many states are making it difficult to get the pricing necessary to return the property line to profitability. So, rather than continue with a book that is losing money and is price inadequate, they shed the business. Take a look at Florida if you want an example of what unnecessary meddling does to the insurance marketplace; in fact, you can use Florida’s actions as a blue-print of exactly what-not-to-do.
Oh they cancelling in NC too. had a house fire last August, so here comes the adjuster. The house should have been totaled. The water damage was terrible, he decided to call Servpro, a nightmare within itself. They all knew this house was beyond repair but yet decided to make big bucks. Now a year later after them hiring the worst contractors the house is molded,and I am getting sick from the mold and musty odors. And then today here comes a notice saying they are terminating my insurance. Not once did the adjuster come down during the remodeling process, and the contractors wasted so much. I am thinking about suing, this is totally unacceptable.
What a travesty! These companies have no problem taking your money, but when it comes time for them to do what they’re in the business of doing, they bail!
funny, bailing when customers have paid into their pockets and they profited… now that they have lost money, they want to leave… so basically, they did not put enough money aside for these types of claims… another hurricane or hail storm and then what? they going to leave the state altogether? um..
On the surface, this seems to be another example of my pet peeve: the insurance industry is dominated by leaders who understand finance, cash flow, and the time value concept of money, but lack understanding of risk and risk analysis. To make matters worse, there appears to be inadequate reinsurance purchases to help offset these large losses. Still, it wouldn’t be the first time I was wrong. End of lecture.
The US homeowners market hasn’t made money 21 of the last 22 years and carriers aren’t not-for-profit organizations. How long should they keep taking it on the chin before reacting?
Carriers responded to the last soft market by going to far – too much coverage in places they had no business writing (i.e. the coast and other disaster-prone areas) and they did so at irrational prices. Shame on the industry for succumbing to the pressure to write business that was priced poorly for the risk.
But, the agency base also bears responsibility.
As I noted above, property insurance is a big-time money loser for two decades. In 2011 the industry lost somewhere between 25 and 50 cents on the dollar, but property results were MUCH worse, losing somewhere between 75 and 100 cents on the dollar. The math on that – for every dollar of property premium they took in, they spent $1.75 to $2.00 settling claims. That’s like making $100,000 a year but spending $175,000 to $200,000 a year. You can’t sustain a business like that, period.
Auto profits are much stronger than property results, though not strong enough to absorb 75 to 100 cents on the dollar of losses. Carriers are requiring supporting auto business to try to off-set property losses and stabilitize profits. Agents contribute to this issue because they often split accounts, putting the home with one carrier and putting the auto with a carrier that offers only an auto market. The result? They’re rewarding the companies that take on only the most profitable business, which hurts the carriers trying to offer a comprehensive lineup of products. If you understand pricing, you’ll know that only worsens the profit issues.
Complicating all of this is that many states are making it difficult to get the pricing necessary to return the property line to profitability. So, rather than continue with a book that is losing money and is price inadequate, they shed the business. Take a look at Florida if you want an example of what unnecessary meddling does to the insurance marketplace; in fact, you can use Florida’s actions as a blue-print of exactly what-not-to-do.
Off soap box.
Oh they cancelling in NC too. had a house fire last August, so here comes the adjuster. The house should have been totaled. The water damage was terrible, he decided to call Servpro, a nightmare within itself. They all knew this house was beyond repair but yet decided to make big bucks. Now a year later after them hiring the worst contractors the house is molded,and I am getting sick from the mold and musty odors. And then today here comes a notice saying they are terminating my insurance. Not once did the adjuster come down during the remodeling process, and the contractors wasted so much. I am thinking about suing, this is totally unacceptable.