Another Florida insurance debacle on the way...

[Uncle Cracker]

There were many homeowners' insurance companies this week with their fingers secretly crossed, hoping that TS Fay would somehow become a hurricane in the midst of its criss-crossing of Florida, so that all the insureds who had claims would have to pay their hurricane deductables (mine is $5000, don't know if everybody's is). Alas, Fay never made the grade, so now we will be hearing all the whining from the InsCo's about how they can't make money, and are gonna have to double their rates again... My heart just bleeds for them...

[cabinetman]

There were many homeowners' insurance companies this week with their fingers secretly crossed, hoping that TS Fay would somehow become a hurricane in the midst of its criss-crossing of Florida, so that all the insureds who had claims would have to pay their hurricane deductables (mine is $5000, don't know if everybody's is). Alas, Fay never made the grade, so now we will be hearing all the whining from the InsCo's about how they can't make money, and are gonna have to double their rates again... My heart just bleeds for them...

What a scam. They collect money for years and then get sphinctered when they have to pay out. IIRC, our HO's is $3200, up from $1150, with a $2500 Ded, and 2% (value) Ded for hurricane.
.

[Uncle Cracker]

They collect money for years and then get sphinctered when they have to pay out.

It's even worse than that... A few years ago, our state legislature very quietly passed a bill drastically reducing the percentage of premiums that insurance companies are required to keep in escrow to pay claims, so that they could increase their profits by investing in who-knows-what. Result of that is that many insurers are very close to insolvency (or at least non-liquidity) if a major disaster occurs. You didn't see any lawmakers standing up taking a bow for that little jewel at voting time, did you?

[crokett]

What a scam. They collect money for years and then get sphinctered when they have to pay out.
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Uhm.. of course. That is how they make money. Get people to pay them without paying anything out.

[OpaDC]

Also wonder how this is going to pan out when comes to the flooding. Granted we are a low state with lots of water, but believe it or not many of us should never flood. Not near any body of water, two feet higher than the street, good street drainage system, etc. But I'll bet many of the flooded people from Tallahassee east and south are going to be denied claims because they had no flood insurance even though they are nowhere near even a 100 year flood zone.

p.s. My part of the state seems to have a protective bubble over it right now. Fay appears to be moving around north of us, although that may still change if the back side manages to push through.

[Hellrazor]

they had no flood insurance

That is a load of crap anyway. HO insurance should be required to cover all events. Or next you car insurance will be by the coverage you want.

1. Car vs car
But if you pay more we will cover:
2. Car vs SUV
And if you pay even more
3. Car vs Truck
etc..

"I'm sorry, your request is denied. You didn't have coverage vs a telephone pole."

[Kristofor]

Alas, Fay never made the grade, so now we will be hearing all the whining from the InsCo's about how they can't make money, and are gonna have to double their rates again... My heart just bleeds for them...

I do feel for all of the folks in hurricane land, and I'm not trying to make light of the difficulties at all...

But, the alternative to insurance companies making money is refusing to offer insurance there at all. I know I had heard about that on NPR where a number of companies were doing exactly that (not offering new policies) a couple years ago after Ivan and company all went through...

Honestly, I'm not sure how they can make money with rates of ~$3K/yr. Considering the size of a hurricane and how many thousands/millions of claims are possible from one event. It doesn't seem like enough of a premium on the premium above the costs in a relatively safer area to actually cover the need to repair/rebuild a house every 50 years due to a hurricane (on top of the normal weather/other claims)...

[Uncle Cracker]

I ain't buyin' it... For 40 years, insurance companies took premiums with very little in the way of natural disasters. But, almost immediately after Andrew, they started whining. Many of them left the state. All the others raised premiums even further, saying they had to "recover" the revenue lost to Andrew. What happened to the revenue they had been taking in while things were quiet? And now it is status quo after any event for them to start the grousing all over. And they try to make the lawmakers believe that there will be no insurance sold in Florida if they aren't given the necessary assistance to keep the profits rolling in. I am not impressed.

[Kristofor]

I ain't buyin' it... For 40 years, insurance companies took premiums with very little in the way of natural disasters. But, almost immediately after Andrew, they started whining. Many of them left the state. All the others raised premiums even further, saying they had to "recover" the revenue lost to Andrew. What happened to the revenue they had been taking in while things were quiet? And now it is status quo after any event for them to start the grousing all over. And they try to make the lawmakers believe that there will be no insurance sold in Florida if they aren't given the necessary assistance to keep the profits rolling in. I am not impressed.

In 1960 the population of the state was less than 5 million people. Today it's +/- 18 million with a larger percentage in the more vulnerable areas.

Look at the $1B+ storms to hit Florida (2004 dollars) since 1992.

• Andrew ($35.6B) 1992
• TS Alberto ($1.2B) 1994
• Opal ($3.6B) 1995
• Georges ($6.5B) 1998
• Charley ($14B) 2004
• Francis ($9B) 2004
• Ivan ($12B) 2004
• Jeanne ($6.5B) 2004
• Dennis $2B 2005
• Wilma $10B 2005

That's $100.4B from just those storms. So, the people who were living in Florida in 1990, would need to have paid about ~ $20K in the intervening period just to cover these storm losses. That's on top of regular fires, thunderstorm damage, Sub $1B tropical storms, burglaries, etc.

Of course the population has increased by %50 since 1990, so it would be less than that per household, but that's the same reason why paying in since 1960 or 1970 when there weren't as many residents doesn't really help much.

I'm not saying the companies aren't still making some money, but there really are companies who are dropping large numbers of policies and refusing to write new ones. I doubt they'd be doing this if they thought those would ultimately be lucrative contracts...

[parnelli]

What a scam. They collect money for years and then get sphinctered when they have to pay out. IIRC, our HO's is $3200, up from $1150, with a $2500 Ded, and 2% (value) Ded for hurricane.
.

WOW! I think I'm in the mid $400 range for a $390k house up North. I knew it was expensive down there, but never knew the actual rate.

[Pappy]

Something that seems to be common in all the responses is that the insurance companies have to recover their losses from the residents of Florida for all the damages from hurricanes.

As an example, I am sure Farmer's Insurance Group will go into the red when you balance the amount they will pay out with the amount of premiums collected on those same policies. During the same period they have collected far more in premiums from me than the one claim I have made cost them. I am also confident in assuming they have a lot of insureds that have not filed any claims.

Isn't this the way the industry works? They are gambling that the claim losses nationwide will be smaller than the premiums collected and investment income from those premiums. Their gamble didn't pay off in Florida or the Texas coast this year. A lot of other places it did.

[dlminehart]

Oh, to have only 2% deductible! For earthquakes in California, the basic policy is 15% deductible (some insurers let you pay more and get a 10% deductible). With the median home value somewhere around $500K, deduct $75K off the top of your claim. Basic personal property coverage is $5K, so plan on beefing that up considerably. Additional living expense/loss of use coverage (while you await your new home) is $15K, or about 6 months rental, assuming you can find one. And, for this breathtaking coverage, you add about 50% to your basic $2000 homeowner policy. If you wanted coverage that would really get you back into your home with all its contents for only 10% deductible, you'd just about double the basic policy cost to about $4000/year. No wonder only 15% of Californians are covered.