Written by: Steven Burns
It’s the time of year that everyone looks forward to! No, not Christmas - not even New Years
where one has the prospect of starting anew - it’s time for your homeowners insurance renewal! While this level of excitement may never be felt by anyone outside of the sphere of insurance professionals, when looking at your renewal policy one question may immediately jump into your mind - why has my premium gone up AGAIN?
We get this question almost every day in the office, so we figured as your agency it is important to try and fill you in ahead of time so you can be prepared once your renewal is sent out to you. “But I’ve never even filed a claim in my life!” “How are these companies getting away with this?”are two of the more frequent rebuttals we receive when first talking to the customer about pricing. Unfortunately, many times premium hikes are often no fault of any individual insured, but rather a reflection of general trends in the insurance industry.
Consider that in 2017, homeowners insurance companies paid out record claims figures in the United States, totaling over 100 billion USD. In years of such financial strain, the carriers’ bottom line is of course affected negatively. This, in conjunction with carriers’ own reinsurance rates increasing, means the customer has to pay in the form of higher premiums. Just as with health insurance, homeowners insurance considers groups of insureds as a pool. In that pool there are “good risks” and “bad risks”. While you personally may not have filed a claim in the past however many years, rest assured (or don’t) that Americans are filing claims at record rates, which is going to affect the amount coming out of everyone’s pockets. Below is a semi-comprehensive list of the various reasons you may be having to pay more on your
homeowners insurance than in years prior:
1. The insurance companies are paying out an unusually high number of claims in recent
years. This can be largely attributed to natural disasters (especially in Florida) as well as
insurance fraud (thank you again, Florida - we still love you though).
2. The inflation guard on your policy has resulted in a mild increase in premium. This factor
does not come across nearly as dubious other points on this list, but it can definitely
cause an increase in premium. Most insurance companies will place a 2-4% inflation
guard on your policy when it is written which works to add small amounts of coverage A
Dwelling (which then can increase coverages such as personal property and loss of use)
to account for the increasing costs to rebuild our homes. This is actually a really good
thing to have built into one’s policy, and can help ensure one isn’t caught out should the
worst happen.
3. Your roof or other aspects of your home are getting up there in age. I singled out roof
age here as that is usually the most prominent factor in what we can call deterioration
surcharge. Once a 3-tab shingle roof (maybe the most common roof type) reaches 15-16
years old, the insurance carrier is going to look at that and suggest (usually through a
premium increase) that you get that replaced sooner than later. Nudge Nudge. While you
may think your roof is in fine form, companies have pretty strict underwriting guidelines
on such things, particularly for the more exposed features of a home.
4. Crime, burglary, and vandalism are on the rise within your zip code. In our country which
seems to get crazier and crazier every day, many places experience upticks in these
sorts of crime which can of course affect the safety and sanctity of our homes. When
these happenings begin to cause damage to our neighborhoods, insurance companies
take notice.
5. Your company has just recently started running your insurance score and that has
negatively affected your premium. American insurers are now utilizing an “insurance
score” to assess the risk profile of individual insureds. The contents and determinants of
this insurance score remain partly unknown, though we are told they are predictive in
determining the likelihood of an individual filing a claim. Based on an insured’s score,
their premium can go up or down when rated. What we can say on the running of these
scores in general:
a. People with large amounts of debt seem to be negatively affected.
b. People with high utilization ratios on their credit cards are negatively affected.
c. People who have had multiple hard checks on their credit, or have opened new
accounts in the past few months are negatively affected.
Vague enough for ya? It is worth noting a poor insurance score does not mean that you
in theory have bad credit. We are generally not too enamored with the use of this insurance
score as we get the feeling the insurance companies are using it as a vague character judgment of an insured with the goal of tacking on additional premium, but it is becoming an industry standard very quickly. We’re gonna all have to ride the creepily dystopian wave on this one.
This is by no means an exhaustive list of all the reasons your homeowners insurance premium may have gone up this year, but these seem to be the most common rationales. So, what do you do? If you ever have any questions about your premium, always give us a call and we will happily discuss things, especially at your renewal. The first step is to investigate your individual case and try to determine what caused the hike. As we hinted at, a lot of the reasons the carrier will give are almost always out of your control to some extent. Luckily, as an independent broker we are able to provide alternative options for our customers in almost every case. Figuring out what an acceptable premium looks like for our customers without compromising coverage or company reputability is our #1 priority. With this in mind, always remember that price is not always paramount! While it is tempting to always opt for the cheapest option, you need to make sure that you have the correct policy with the right coverages. That is where we come in - we serve YOU, not any individual carrier.