As weather disasters strike with a lot more frequency, homeowners first get hit together with the destruction or total loss in property. Some are then hit with the unexpected decrease in home insurance policies as insurance firms re-evaluate their financial liabilities.
After a tornado ripped through Springfield, Massachusetts, this past year, R. Paula Lazzari’s home was badly damaged. The retired teacher found broken windows, missing siding as well as a damaged roof. Her insurer offered to fund repairs for starters broken window and many in the siding. It took nine months — and mediation services from an independent adjuster along with the Massachusetts Division of Insurance — to have her bills paid, according to the parties involved.
On this era of unpredictable weather patterns, Lazzari’s case is not unique. Insurance agencies are raising rates, cutting coverage, balking at some payouts and generally shifting more expense and liability to homeowners, in line with reports from the industry and its critics.
“Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornados and floods recently,” the client Federation of America said in a very statement after studying industry data.
That is a concedes it is attempting to avoid getting trounced by those same punishing weather patterns.
“Last year (2011) was a fantastic year for rental destruction,” said Michael Barry with the Insurance Information Institute (III), a niche trade group. “Insurers have a step back in assess whether or not they can absorb severe losses.”
STATES LEFT Inside the COLD
Some insurance providers have served of weather-challenged states — meaning they’ll not write new homeowners policies and may not renew contracts with current policyholders.
From the wake of Hurricane Irene last summer, for example, Allstate informed some 45,000 Idaho policyholders it wouldn’t normally renew contracts that have been not bundled with vehicle insurance.
After a spate of tornadoes last April caused $11 billion of property damage in Alabama, Alfa Mutual Group announced it would not renew 73,000 Alabama property insurance policies.
“The increased frequency and seriousness of storms over the past decade have highlighted the need for Alfa to evaluate its overall property portfolio,” Alfa President Jerry Newby said in the statement.
Florida, where insurers have already been dropping coverage since Hurricane Andrew in 1992, is a useful one of where this will lead. By having an annual average of $1,460 per home, homeowners’ premiums you’ll find second-highest near your vicinity (Texas, at $1,511 is first), according to the newest data available, a 2010 report from the Insurance Information Institute.
“Florida’s over charts in terms of pricing,” said Mike McCartin, an Ashton, Maryland, independent insurance professional.
The state of hawaii has stepped in cover some 1.5 million properties via its publicly funded Citizens Property and Insurance Corporation as insurers drop a growing number of homes.
“You only have major private insurers which can be unwilling to create policies in Florida,” said Robin Westcott, the state’s insurance consumer advocate.
“It’s merely a tough industry to have,” 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 clients
While companies are not abandoning states anytime, many choose to drop coverage on individual homes or customers that may seem at risk of file claims. Insurers generally work with three-year contracts with homeowners, Barry said. Following those contracts, insurers can plan to raise rates or not renew.
When frozen pipes caused flooding in Phil Berger’s Ijamsville, Maryland, home a year ago, he got a $6,000 check from Allstate for your damages — plus a policy review. Berger said an Allstate contractor told him to produce $100,000 in repairs to his home at his expense or although lose his coverage. He refused, and instead found a less expensive policy which has a company that required only 1 smaller repair before in the home.
“You simply need to be on the toes continually,” Berger said.
Allstate declined to reply to Berger’s case, but sent an email respond to general questions about the company’s nonrenewal policies.
“Allstate responsibly manages its risk by opting to never renew policies as warranted,” company representative Kevin smith wrote. “These actions are taken into consideration, and help ensure Allstate’s continued ability to give you a wide variety of insurance products to consumers at a competitive rate, while remaining financially strong in every community we serve.”
PAYING MORE On the cheap
Even homeowners that renew each year may find new limits buried within their policies. The customer Federation report said insurance carriers have “sharply empty the catastrophe coverage wanted to consumers” by raising deductibles, capping replacement costs, and — significant for individuals inside path of tornadoes and hurricanes — removing coverage for wind damage if another non-covered event (ordinarily a flood) can also happen.
Industry groups say this misstates the facts.
“The …(CFA) cannot become more wrong,” said Dr. Robert P. Hartwig, president of the Insurance Information Institute. “Cities for instance Tuscaloosa, Birmingham as well as others are now being rebuilt today on account of private insurance agencies paying losses — not from ‘hollowed out coverage’ policies.” Insurers have paid “literally billions” of dollars to “hundreds of a huge number of claimants” impacted by earthquakes, he stated.
Hartwig also defended the practice by some insurance firms of leaving certain states or regions.
“If you know an insurance provider that they can can’t raise rates despite nine hurricanes by 50 percent years, obviously insurers will need to lessen exposure,” he was quoted saying.
But homeowners’ insurance premiums have been rising sharply. They have increased a normal 6.33 percent annually between 2002 and 2009, in line with the National Association of Insurance Commissioners (NAIC). This year, insurers have called for rate increases of 18 percent if not more in 11 states, according to the Consumer Federation.
Robert Hunter, mcdougal from the consumer report, has questioned whether limit-laden policies are worth increasing costs. But mortgage brokers require homeowners insurance, and those who have observed a devastating house fire or storm is unlikely to be ready to go without coverage.
Price comparisons
Now how can consumers, that have little choice but to have their coverage, do as Berger suggests and make on their toes?
Hunter tells homeowners to look carefully. “Go with your state’s insurance coverage website to investigate houses comparable to yours to match prices,” he explained.
The NAIC offers a map to all or any state insurance offices on its website, http://www.naic.org/state_web_map.htm), and offers info on consumer insurance complaints.
Hunter also recommends checking comparison websites for example insuranceproviders.com (http://www.insuranceproviders.com) or insweb.com (http://www.insweb.com) for companies with favorable testimonials for in your state.
Another step is to get an experienced agent to help you, said Jim Donelon, Louisiana’s insurance commissioner and president-elect on the NAIC.
“I recommend you speak with as numerous people that you can. Experience an independent agent — someone who’s not mounted on a selected company — and find hold of captive agents but understand that captive agents could only represent their company.”
The agents can check to be sure no important coverage — like wind — is carved out from the policy.
Compare what the agents offer in doing what found on the internet, said Randy Moses, assistant director using the South dakota Insurance Department.
Even with getting coverage, consumers will find that they need extra help. Lazzari needed both a completely independent broker and a public adjuster to end her case. Her insurer, Norfolk Dedham Insurance, but not only initially refused to afford almost all 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 it wasn’t unusual for claims like Lazzari’s to take the perfect time to resolve.
Lazzari contacted an unbiased broker who worked with Norfolk Dedham to successfully complete her home repairs. Even so the broker said switching insurers would increase her payments 185 percent. Then Lazzari contacted the Massachusetts Division of Insurance to discover a public adjuster, who eventually persuaded Norfolk Dedham to help keep her on its rolls.
“We were eventually capable of working things out with Ms. Lazzari,” said Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group. “In such cases with independent adjusters, the claims usually get strung out and tend to be more difficult to settle compared to what they would otherwise. But cases like case are pretty common and, on the whole, we’re pleased about how things discovered with her.”
