Are your Insurance Premiums going up next year?

January 5, 2018

October through December have been rough months for the state of California. The wildfires have brought devastation across the state causing heartaches for Californians and historic insurance losses. There is an estimated ten billion, that’s right $10,000,000,000, in losses so far, according to the state's insurance regulation office caused from the Napa and Sonoma area fires alone. The Wine Country fires impacted 3,000 businesses and over 20,000 homes. As I write this the Thomas Fire in Southern California is just about fully contained, and the damages are being assessed. Certainly, the losses from the Thomas fire will add significantly to the total damages suffered this fall fire season.

As an insured, you may be wondering what is going to happen to your own homeowner's insurance next year. Directly affected by the wildfire or not, you may wonder if your rates will take a hike due to the catastrophic nature of the event.

The short answer is – We don’t really know yet. The California home insurance market was already undergoing a change prior to this year’s fires. Numerous insurance carriers had been pulling out of entire zip codes while other carriers raised rates or put strict underwriting guidelines on new business. The California Insurance market is heavily regulated, and homeowners may have good old prop 103 to thank for minimizing any increase in cost of home insurance next year. Prop 103 was a law passed in California in 1988 and requires the “prior approval” of the state’s insurance regulators before insurance companies can implement property and casualty rates. It essentially prevents insurance companies from dramatically increasing homeowner's insurance rates following a catastrophic loss. However, if insurance companies can show a track record of substantial losses rate hikes will be approved over the next few years. Insurance companies have been challenging prop 103 for years and will surely be fighting its provisions this year.

The Wildfire Safety and Recovery Act is starting to gain in Sacramento. This legislation is intended to keep insurance carriers from dropping or non-renewing clients following the wildfire disaster or pulling out of “high risk areas”. Insurance companies do not like having their hands forced. At the end of the day, insurance is a business, and if insurance companies are not able to operate in a profitable market they will find a way to leave. Less carriers means less competition and higher rates.

The good news is California is a HUGE market, and there should always be carriers competing for your business. There are several new carriers who are entering markets where mainstream carriers have deemed to be too risky. I believe more and more California homeowners will be moving to smaller specialty companies for their insurance needs over the next few years.

There is a new normal in California. Both insurance carriers and policy holders will need to adapt to the ever-increasing wildfire risks that no longer affect only the rural property owner. There will be rate increases in 2018, but they shouldn’t be over the top.

Our office is dedicated to staying informed on our changing insurance markets. If you have any questions on your home insurance or the changes ahead of us we encourage you to call or email.

The Disappearing Insurance Agent

April 11, 2017

When meeting with affluent prospects, I’m often astonished that I have to explain to them simple insurance concepts. Receiving financial advice is not new to these people. They usually have one or more financial advisors, an accountant, a tax professional, a realtor and an attorney. But when it comes to insuring their belongings and protecting their wealth, they are often clueless and without professional help. They desperately need a good insurance broker.

This is not a new problem. An insurance agent’s presence has long been missing from the financial team of many affluent households. Thus, many affluent households are badly underinsured for both property loss and liability risks. Why don’t these households have an insurance agent? And if they are really that affluent, why do they even need good insurance?

The Insurance Market has Changed

I believe the following reasons explain provide some of the answers as to why many affluent households don’t value an insurance agent’s advice:

The never-ending, low-price advertising campaigns run by major insurance companies hurts our image. That onslaught of advertising reduces our industry to a lowly commodity status – that’s how consumers view us. Watch TV for a few minutes and you will probably see a commercial from an insurance company that promises to save you 15% or more. That price-based advertising finds its way into the homes of the highest-end clients, and makes them more concerned about the price of insurance than about having good coverage.

There is a lack of highly skilled personal-lines insurance agents. I often meet new clients who own substantial wealth, yet have automobile insurance with insufficient liability limits. Typically, they buy it from a company like GEICO. No disrespect towards GEICO, but mass market insurance companies don’t fit well into the risk management plan of affluent households.

Look further into the lack of good insurance brokers. Most highly-skilled insurance agents focus on writing commercial insurance. Lower-skilled agents focus on selling personal lines. They gravitate towards selling price-driven products like automobile and homeowners policies. Many personal lines agents are scared to present an adequate insurance plan to an affluent household. They fear losing the sale over price.

Consumer confidence in our industry is low. To blame is the proliferation of price war advertising and increasing numbers of unskilled agents. Our consumer confidence rating is now below 50%. That goes for both insurance carriers and agents alike. Unimpressive numbers indeed, especially for an industry that spends over $5 billion annually on advertising.

Increased Wealth Brings Greater Risk(s)

A greater percentage of middle-class households are more adequately insured than affluent households. Why do affluent families even need a good insurance plan? Because wealthy families are more likely to be the targets of lawsuits. The lifestyle of serving on board of directors, sailing privately-owned yacht, flying an airplane, employing nanny’s and housekeepers, owning high priced property, etc. can subject the affluent to additional liability exposure from:

A lower-skilled general lines agent can’t help them. Households like that need a highly-skilled insurance broker who understands high-end insurance products. A qualified broker will construct a personal risk management plan that ensures that minor threats aren’t over insured and that major threats aren’t underinsured.

My Expertise

Protecting high-value properties and expensive personal items requires sophisticated insurance products. My agency manages a 2.5 million dollar personal lines book of business that covers about 250 households in Norther California. A typical client has a net-worth over $1,000,000, and a household income over $250,000. They own a home with a value over $500,000.

Affluent households have worked hard to accumulate wealth. They deserve insurance brokers who know how to protect it.

Oroville Dam Flood Insurance Information

February 13, 2017

With historical rainfall and snowpack totals our aging infrastructure is being put through the ultimate test. So far, our systems have handled the substantial amount of water entering and exiting waterways with minimal issues. However, more storms are on the way and there is no definitive answer to the extent of damage caused by the water that flowed over the Emergency Spillway of Lake Oroville.

The evolving situation with Lake Oroville’s dam has created a lot of concern for public safety and for property owners who are unsure if they would be covered if there is a dam failure. Floods are the number one natural disaster in the United States. Despite the risk, many residents and businesses are unaware that they would need to purchase a flood policy to protect their property and belongings. Your homeowners, renters, condo or businessowners policy excludes coverage for damage caused by flood.

Another myth associated with floods is that you will receive Federal Aid as reimbursement for losses. Federal Emergency Management Agency (FEMA) disaster aid is only available during presidentially declared disasters. More than likely, a failure of a dam would trigger a state of emergency and FEMA funding. However, Federal aid is often in the form of a loan from the Small Business Administration (SBA) that you must pay back with interest. Flood insurance policies pay claims whether or not a disaster is declared.

Most people living within a designated floodplain have flood insurance due to requirements from their lender. However, nearly a quarter of all National Flood Insurance Programs (NFIP) claims occur outside of designated floodplains. Flood insurance is available to protect homes, condominiums and nonresidential buildings, including farm and commercial structures, whether in or out of the floodplain in participating communities. Most of Oroville and the surrounding areas are in participating communities. Many of these homes and businesses may qualify for the low-cost Preferred Risk Policy, which can be purchased for as little as $130/year.

Please feel free to call our office to learn more about your risk for flooding and how to prepare for floods. We can be reached at 530-267-6268 or jeff@jfowlerins.com.

Sources:

https://www.agents.floodsmart.gov/floodsmart/pdfs/FloodRisksDam.pdf

https://www.agents.floodsmart.gov/floodsmart/pages/flooding_flood_risks/dams.jsp

http://www.kcra.com/article/evacuation-orders-issued-for-low-levels-of-oroville/8735215