Recently we have received quite a few calls regarding rate
increases on property coverage for home and business insurance. Most people don’t understand the reason
behind these increases. Here is an explanation
of what has contributed to your
increases.
Tornado losses alone between 1996 and 2009 produced the
following results for losses over 1 million
CO had over $176 million, LA over $189
million, MO over $693 million, KS over $778 million, AR over $829 million, TX
over $1,049 million and OK over $1,729.
Hurricanes and tropical storms from 1991 to 2010 made up 44% of total
catastrophe losses followed by tornado losses at 30%, winter storms at 7.4%,
terrorism at 6.8%, earthquakes and other geologic events at 5.1%,
wind/hail/flood at 4.1% and fire at 2.2%.
The U.S. Catastrophe
Record 2001 - 2010
The following chart shows the number of
catastrophes causing insured property losses of at least $25 million.
|
Year
|
Number of Catastrophes
|
Claims (Millions)
|
Insured Losses (Billions)
|
In 2011 Dollars
(Billions)
|
|
2001
|
20
|
1.6
|
$26.5
|
$33.7
|
|
2002
|
25
|
1.8
|
$5.9
|
$7.4
|
|
2003
|
21
|
2.6
|
$12.9
|
$15.8
|
|
2004
|
22
|
3.4
|
$27.5
|
$32.7
|
|
2005
|
24
|
4.0
|
$62.3
|
$71.8
|
|
2006
|
33
|
2.3
|
$9.2
|
$10.1
|
|
2007
|
23
|
1.2
|
$6.7
|
$7.3
|
|
2008
|
37
|
3.9
|
$27.0
|
$28.2
|
|
2009
|
28
|
2.2
|
$10.5
|
$11.0
|
|
2010
|
33
|
2.4
|
$14.1
|
$14.5
|
According to www.ncdc.noaa.gov,
the U.S. has sustained 133 weather/climate disasters since 1980 where overall
damages/costs reached or exceeded $1 Billion.
The total standardized losses for the 133 events exceeded $875 billion.
These losses have a direct effect on insurance
companies. When an insurance carrier’s
claim reserve is depleted, the result is higher insurance costs in an effort to
build that reserve once again and to balance out future losses.
Even if you have never had a claim, these natural disasters
affect all of us by raising insurance rates.
We have all seen the results of drought producing bad crops,
freezing temps damaging citrus crops, therefore changing the supply and
resulting in high prices in the grocery store.
How does this relate to insurance?
Much the same, if the reserves aren’t available to pay claims, the need
to do something to make sure that funds are available should another
catastrophic loss occur becomes necessary., which means increasing prices.
After a heavy rain and hail storm, how many of us have seen
the roofers combing the neighborhoods looking to tell people they have hail
damage? The roofer knocks on the door,
tells you he was just at your neighbor’s house and will be making repairs for
hail damage and he noticed you had damage on your roof. He tells you he can take care of the repairs
and file it directly with your insurance company and you don’t have to do a
thing except to authorize him to do the work.
These claims have cost the insurance industry millions of dollars and a
high percentage of the repairs were never needed in the first place.
This defective practice should make you angry because these
costs are passed on to you, the consumer. You see it every time your insurance
renews. My advice is contact your
insurance company direct and obtain 3 or 4 estimates from reputable roofing
companies. Ask your insurance company if
an adjuster could come out to examine the damage before committing to an
unknown contractor knocking on your door.
All of the above is reflected when you open your insurance
bill. Odds are your insuring company is
not limited to writing coverage only in Illinois. Many of these carriers are U.S. wide insurers
and therefore they are affected by disasters occurring in all 50 states. Consequently, you the consumer will see the results of such disasters.
