There has been a lot of press around homeowners’ insurance and the difficulty that has arisen with pricing and availability of homeowners insurance. The news stories want to attract your attention and clicks on the web, so the headlines are pretty sensational. Here is a look at the issue from a local perspective.
Availability
The Ohio, Kentucky and Indiana marketplace has not seen the exiting of carriers or major coverage restrictions. Our area has not been the locus of high dollar catastrophes such as hurricanes, wildfires, or earthquakes. That does not mean that flood losses, high wind losses and tornadoes have not cost property insurers a lot of money. Some of these losses are aggravated by climate change and our area is not immune to this factor.
Our customers with homes in Florida and other coastal states have been impacted by the exit of carriers in those states. A combination of legal environments that favor claimants and climate changes that have aggravated storm intensity and frequency have made insurance companies more conservative. Changes in FEMA’s flood pricing have also impacted these areas.
Coverages
On one hand you will see increased vigilance on roof-related issues. Conditional renewal unless roof condition is acceptable is more common. Changing the valuation for an older roof, over 15 years, to Actual Cash Value (ACV) versus Replacement Cost is also being seen.
Some insurers are using more robust flood hazard data than FEMA, to price and select risk. Changes in the underlying FEMA rating program have also increased renewal costs and hiked new flood insurance costs significantly.
On the other hand, insurers are enhancing this product with additional coverage. Most companies are now offering some level of coverage for underground service lines, water and sewer lines are the primary target items. These were excluded from coverage before this addition.
Some homeowners’ policies are offering Equipment Breakdown coverage that provides some level of coverage for building systems such as heat, HVAC, and some appliances. This is new coverage. Carriers have also added coverage for cyber losses and identity theft.
We maintain that there is a split personality in insurance carriers, as one side of the house is raising rates, restricting coverage, and using more detailed tools to evaluate risk. The other side of the house is adding coverage for formerly excluded items. The product expansion and enhancements are sales tools to attract new business.
New coverage brings new losses. It would appear that the underwriting and marketing departments are on separate floors and do not exchange data. It is not clear how coverage expansion is impacting renewal pricing.
What you can do to manage the insurance cycle
Values
The first item to consider is your values on the policy. Insurers like to use “Reconstruction costs” as their basis for underwriting. This valuation reflects that most property insurance claims are not total losses, so the repair costs involve matching new finishes to existing finishes. If you have remodeled your home, you know the challenge here. So when you look at the values on your policy, remember the need to have limits that will pay for reconstruction versus replacement.
As the owner you should also update your values for major remodeling, changes, or additions to your property. If the insurer believes you are understating your values, it places you at a disadvantage in negotiating terms.
Maintain your Property
Insurance is not intended to be the roof replacement provider. Waiting for systems and components to fail versus having a good preventative maintenance program will make having a stable insurance placement more difficult. Poorly maintained property generates higher losses and a frequency of claim activity. Both are detrimental to a stable insurance program.
Evaluate your Deductible
Carrying a low deductible can lead to your turning in small claims. The insurance company believes that frequency breeds severity. So, small claims are a predictor of future large losses. If you can afford to absorb a large dollar amount now, you can protect your access to the higher limits later.
Practice sound Risk Management
There are quite simple and low-cost things you can do to protect your property. Maintain your smoke detectors and carbon monoxide detectors. Single station smoke alarms have a ten-year life span. If you have not replaced your detectors in this period, you may have limited protection.
Upgrade water connections for your washer, refrigerator, and dishwasher. All of these appliances come with rubber or plastic hoses. Upgrading to higher quality stainless steel supply lines is low dollars and high return on investment.
Manage water damage exposures by using technology. If you do not use technology, identify, and exercise water shut off valves. One simple loss prevention step is shutting off water when you leave home overnight. This is a no cost step that prevents a major water loss from unattended property.
Document updates to systems such as HVAC, furnace, electrical system plumbing and roof. Being able to clearly identify when these systems were updated, and the extent of the update can be important for negotiating with your insurer.
The Driehaus Difference
We do things so you do not have to! Tracking the behaviors of our homeowner’s insurance companies, knowing their programs related to water damage detection, roof surveillance and pricing trends are our job and we do it well. We cannot control climate change and its impact on natural hazards. We have discussed these in other articles. We can offer some low to no cost risk management steps and share our knowledge of insurance best practices to get you the best insurance program that is tailored to your needs. Call us at 513-977-6860 or use our website, Driehuasins.com to reach us. We want to be your insurance provider.