Hurricane Insurance Is About to Absolutely Skyrocket

Discussion in 'Economics' started by ByLoSellHi, May 31, 2009.

  1. Many insurers are leaving the hurricane insurance business completely including All State and State Farm in Florida. In other words, people can't afford to pay the premiums it would take for them to write profitable insurance policies, so they said "f**k this, we're not charities."

    Watch and see as the states that formerly put intense pressure on insurance companies to write artificially low hurricane insurance premiums lose their leverage to do so as they run deeper and deeper budget deficits, and more and more homes are vacated in the hurricane belt.

    If you plan on retiring or moving to a hurricane zone soon, better plan on banking some serious coin for insurance and say some prayers that you'll still be able to get it in the next few years.


    Anticipated hurricanes leaving consumers exposed

    By IEVA M. AUGSTUMS – 1 day ago

    CHARLOTTE, N.C. (AP) —
    As the 2009 hurricane season arrives, many homeowners are finding insurance is either more expensive, or harder to get.

    Homeowners from New York to Florida and in the Gulf Coast region are again seeing premiums rise and coverage change. And more are being dropped completely by their carriers as insurers try to limit their exposure in high-risk areas.

    "They just don't like being in the business ... too much risk," said Scott Hall of Market Street Advisers, a financial advisory firm in Wilmington, N.C.

    Homeowners' insurance premiums are up about 3 percent nationwide and probably more in some coastal areas where the potential for damage is greater, according to the Insurance Information Institute, a New York-based industry group. The hurricane season starts Monday and runs until Nov. 30.

    Several factors are affecting premiums and coverage, including the $26 billion insurers paid out on catastrophic losses last year and the impact of financial market turmoil on the companies' earnings. Changes in state regulations are also driving some premiums higher.

    Late last year, Allstate Corp. and State Farm Insurance Cos., two of the nation's top home and auto insurers, raised premiums in states including Texas, saying the increase was needed to offset a rising number of claims. Hurricanes Gustav and Ike hit the U.S. in September.

    Northbrook, Ill.-based Allstate also implemented policy changes that raised deductibles and stopped offering coverage in high-risk coastal areas including downstate New York.

    "We continually review all those items and make the necessary adjustments," said Allstate spokesman Mike Siemienas.

    Meanwhile, State Farm Florida, a subsidiary of the Bloomington, Ill.-based insurer, is trying to pull out of the Florida market after the state denied the company's request for a 47 percent rate hike. Company officials have said they need the increase to remain financially viable. Discussions with regulators are continuing.

    Shawna Ackerman, who co-chairs the American Academy of Actuaries' property and casualty extreme events committee, said she has not heard of any mass non-renewals or existing policy changes that are in the works for 2009. But insurers are continuing a process that began after they paid out $23.7 billion in claims — a number adjusted for inflation as of 2008 — on Hurricane Andrew in 1992, trying to limit their exposure, or vulnerability to losses, in coastal areas.

    Hurricanes Ivan in 2004 and Katrina in 2005 forced several to pull back further, with many companies re-evaluating policy coverages and raising rates. Ivan caused more than $8.1 billion in losses after adjusting for inflation, while Katrina was the most costly, with losses now calculated at $45.2 billion, according to Insurance Information Institute data.

    "Over the last five years, where we've seen record catastrophe losses in coastal areas — Florida, Mississippi, Louisiana and Texas — the increases in (premiums in) those areas have outstripped what we have seen nationally," said Bob Hartwig, the Insurance Information Institute's president.

    Insurers will raise premiums wherever state regulators allow them to, Hartwig said. "In areas where they are not given that opportunity, insurers are going to scale back their exposure."

    In 2007, Florida ranked as the state with the greatest hurricane exposure, facing a potential $2.46 trillion in losses, according catastrophe risk-modeling firm AIR Worldwide Corp. A close second, New York had $2.38 trillion in exposure; and third was Texas with $895.1 billion of exposure.

    Current forecasts suggest a less active season than was expected last year, encouraging news for anyone with property or investments that lie within hurricane-prone coastal areas.

    The National Oceanic and Atmospheric Administration has predicted nine to 14 named tropical storms this year. The named storms are expected to include four to seven hurricanes, of which one to three are likely to be major storms.

    "Even though the forecast for storms this year seems to be down, those of us who are worried about this stuff are concerned that the East Coast is due," said Charles Williamson, president of AIU Holdings' Private Client Group, a unit of New York-based American International Group Inc. that offers property casualty insurance. "The East Coast hurricane market, particularly Florida, is very volatile right now."

    Rising prices and deductibles may lead some homeowners to question whether they're overpaying.

    "It is very difficult for consumers to figure out if they are being gouged or not," said J. Robert Hunter, a former Texas State Insurance Commissioner who is now director of insurance at the Consumer Federation of America, a consumer advocacy group.

    "You have to trust your state regulator," he said, referring to the fact that state officials limit how much insurers can charge.

    The $26 billion casualty insurers paid out last year for catastrophe losses was substantially more than they expected. The companies also lost billions of dollars in the financial markets; they use investments to supplement their premium income and create a cushion for when they're hit by big claims.

    For example, Allstate's catastrophic losses more than doubled in 2008 to $3.34 billion. This led the company to report a loss of $1.68 billion, or $3.07 per share, for the year, compared with net income of $4.64 billion, or $7.77 a share, in 2007.

    During the first quarter of 2009, the insurer said, falling investment income contributed to a $274 million loss.

    Industry leaders also say they are seeing pricing increases for reinsurance, or insurance that is sold to other insurers to protect against the risk of losses.

    "Insurers are incurring more costs, which means they need to get more underwriting profits," said commercial property insurer FM Global chairman and chief executive Shivan Subramaniam.

    "At some point in time they are going to have to charge clients more money."

    Copyright © 2009 The Associated Press. All rights reserved.
  2. I'm glad you're taking over from me as the doomsday soothsayer.

    Actually, my insurance agency fell asleep on the job. I got a new inspection that highlighted new doors, etc, and wentfrom 2200 to 900.

    Of course, in two years, it'll be 2200 again.

    I'm setting up a three legged stool and noose, just in case you 've got some more stuff before tomorrow.

    You know about North Korea? Right?
  3. North Korea is not a problem.

    I'm a realist.

    Don't let the 'doom and gloom' crowd scare you about North Korea. There is very little risk in that situation. They just want some attention.

    Now the U.S. and Europe....economic calamity is knocking on the door, and is about to kick the frickin' thing off the hinges.
  4. Wouldn't it be a hoot if insurance companies charged hurricane premium by the REGION... rather than charging other areas higher amounts to offset real costs for hurricane losses? Then people left in droves citing "can't get or afford insurance"?

    Auto insurance charges by the region...
  5. speaking of insurance increases. blue cross is sending out blanket increases again. i got mine yesterday. went from 654 to 729. that is after a 30% increase last year.
  6. Well clearly you're not the Florida real estate expert you claim to be or you would understand how meaningless this is to those of us who live here. Insurance is expensive though and will only go up no doubt. But, not because of this.
  7. Do you get an insurance break if you build a concrete or cinder block house? I've always wondered why they build stick frame houses in hurricane areas.
  8. I wonder if this would warrant an insurance rate cut:


    Hell, screw hurricane insurance. Build one of these:


    Or these:

  9. I heard some companies in Florida aren't going to cover asphalt shingle roofs over ten years old. That's going to be a problem for the vast majority of homes. Look for blue tarps to cover roofs for years after a storm. I expect if Florida gets hit with a minor Catagory 3 nobody will cover the state anymore.
  10. $900...I wish mine was $900...mine just went from $5500 to $3500
    #10     May 31, 2009