As Weather Gets Biblical, Insurers Get lost
As weather disasters strike with increased frequency, homeowners first get hit with the destruction or total decrease of property. Most are then hit while using unexpected decrease in property insurance policies as insurance providers re-evaluate their financial liabilities.
After the tornado ripped through Springfield, Massachusetts, last year, R. Paula Lazzari’s home was badly damaged. The retired teacher found broken windows, missing siding and a damaged roof. Her insurer agreed to fund repairs first broken window and some of the siding. It took nine months — and mediation services from a completely independent adjuster plus the Massachusetts Division of Insurance — for getting her bills paid, in accordance with the parties involved.
Within this era of unpredictable weather patterns, Lazzari’s case isn’t unique. Insurance firms are raising rates, cutting coverage, balking at some payouts and generally shifting more expense and liability to homeowners, in line with reports on the industry and its critics.
“Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornados and floods in recent times,” the buyer Federation of America said in a statement after studying industry data.
That is a concedes that it’s trying to avoid getting trounced by those same punishing weather patterns.
“Last year (2011) was a rare year for natural disasters,” said Michael Barry in the Insurance Information Institute (III), a market trade group. “Insurers have a stride back to assess whether or not can absorb severe losses.”
STATES LEFT Within the COLD
Some insurance agencies have removed of weather-challenged states — meaning they’re not going to write new homeowners policies and might not renew contracts with current policyholders.
Inside the wake of Hurricane Irene last summer, for instance, Allstate informed some 45,000 Idaho policyholders that this may not renew contracts that had been not bundled with car insurance policy.
After having 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 harshness of storms during the last decade have highlighted the requirement of Alfa to evaluate its overall property portfolio,” Alfa President Jerry Newby said in a statement.
Florida, where insurers happen to be dropping coverage since Hurricane Andrew in 1992, is a useful one of where this can lead. By having an annual average of $1,460 per home, homeowners’ premiums there are second-highest in the nation (Texas, at $1,511 is first), based on the most up-to-date data available, a 2010 report in the Insurance Information Institute.
“Florida’s from the charts on the subject of pricing,” said Mike McCartin, an Ashton, Maryland, independent insurance broker.
The state of hawaii has stepped directly into cover some 1.5 million properties via its publicly funded Citizens Property and Insurance Corporation as insurers drop an increasing number of homes.
“You have major private insurers which are unwilling to create policies in Florida,” said Robin Westcott, the state’s insurance consumer advocate.
“It’s only a tough sell to stay in,” said Phil Supple, a spokesman for State Farm, which has been once Florida’s largest property insurer. It stopped writing new homeowners’ policies there in 2007.
CHERRY-PICKING Of shoppers
Though companies usually are not abandoning states at will, many prefer to drop coverage on individual homes or customers that may seem at risk of file claims. Insurers generally develop three-year contracts with homeowners, Barry said. Following those contracts, insurers can decide to raise rates or otherwise renew.
When frozen pipes caused flooding in Phil Berger’s Ijamsville, Maryland, home a year ago, he got a $6,000 check from Allstate to the damages — plus a policy review. Berger said an Allstate contractor told him to create $100,000 in repairs to his home at his expense or he’d lose his coverage. He refused, and instead found a more economical policy using a company that required only one smaller repair before over the home.
“You should just be on the toes always,” Berger said.
Allstate declined to inquire into Berger’s case, but sent an e-mail response to general questions about the business’s nonrenewal policies.
“Allstate responsibly manages its risk by opting not to ever renew policies as warranted,” company representative Kevin Smith wrote. “These actions are carefully considered, and help ensure Allstate’s continued capacity to supply a wide selection of insurance products to consumers at the competitive rate, while remaining financially strong in most community we serve.”
PAYING MORE At a discount
Even homeowners that renew each year will find new limits buried of their policies. The individual Federation report said insurance firms have “sharply empty the catastrophe coverage offered to consumers” by raising deductibles, capping replacement costs, and — significant for people inside 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 reality.
“The …(CFA) could hardly be wrong,” said Dr. Robert P. Hartwig, president with the Insurance Information Institute. “Cities like Tuscaloosa, Birmingham yet others will be rebuilt today on account of private insurance companies paying losses — not from ‘hollowed out coverage’ policies.” Insurers have paid “literally billions” of dollars to “hundreds of 1000s of claimants” afflicted with rental destruction, he said.
Hartwig also defended the practice by some insurance providers of leaving certain states or regions.
“If you know an insurer how they can’t raise rates despite nine hurricanes into two years, obviously insurers will need to reduce exposure,” he explained.
But homeowners’ insurance charges are actually rising sharply. They’ve got increased a normal 6.33 percent annually between 2002 and 2009, according to the National Association of Insurance Commissioners (NAIC). In 2010, insurers have requested rate increases of 18 percent or more in 11 states, according to the Consumer Federation.
Robert Hunter, the author with the consumer report, has questioned whether limit-laden policies count ever rising costs. But mortgage brokers require property insurance, and all those who have observed a devastating house fire or storm is unlikely to be prepared to go without coverage.
COMPARISON SHOPPING
Now how can consumers, who’ve little choice but to maintain their coverage, do as Berger suggests and make on their toes?
Hunter tells homeowners to buy carefully. “Go on your state’s insurance plan website and look for houses comparable to yours to compare and contrast prices,” he explained.
The NAIC supplies a map to everyone state insurance offices on its website, http://www.naic.org/state_web_map.htm), and provides info on consumer insurance complaints.
Hunter also recommends checking comparison websites including insuranceproviders.com (http://www.insuranceproviders.com) or insweb.com (http://www.insweb.com) for companies with favorable customer feedback for where you live.
Another step is to find an established agent that can help, said Jim Donelon, Louisiana’s insurance commissioner and president-elect from the NAIC.
“I recommend you speak to as many people since you can. Have an independent agent — someone who’s not that come with a specific company — and find talking to captive agents but be aware that captive agents can just represent their company.”
The agents can check to be certain no important coverage — like wind — is carved out of the policy.
Compare what the agents offer using what found on the internet, said Randy Moses, assistant director using the South dakota Insurance Department.
Even after getting coverage, consumers may find that they need extra help. Lazzari needed both an unbiased broker and a public adjuster to settle her case. Her insurer, Norfolk Dedham Insurance, not merely initially refused to fund the vast majority of her home repairs, but in addition planned to go her as being a customer, she said. Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group, confirmed her version of events, but said hello has not been unusual for claims for example Lazzari’s to look at time to resolve.
Lazzari contacted a private broker who worked Norfolk Dedham to successfully complete her home repairs. However the broker said switching insurers would increase her payments 185 percent. Then Lazzari contacted the Massachusetts Division of Insurance to get a public adjuster, who eventually persuaded Norfolk Dedham to maintain her on its rolls.
“We were eventually able to work things out with Ms. Lazzari,” said Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group. “In most of these cases with independent adjusters, the claims have a tendency to get strung out and usually more and more difficult to end compared to what they would certainly. But cases like case are pretty common and, in general, we’re pleased with how things been found back with her.”
