The Concerned Insured: Raise it or Risk it?

The Market Is Changing

The insurance market is constantly in a state of flux.  Risk rating goes up or down depending on how many claims are paid out, competition between rivals in the market, and changes in the environment.  To counteract premium increases to insureds, insurance companies must be prepared for the market and buyers incentives to change.  But sometimes, it’s not so easy to predict what kinds of changes are going to occur and that can leave some insurance companies frazzled, trying to keep their processes on an even keel.

The Soft Side of Insurance

Insurers describe the insurance market in two different types:  Soft markets and hard markets.  A soft market, in simpler terms, is where the number of buyers of insurance products is down, and there are many more sellers of products in the market.  There are more sellers because people are less willing to buy new products or change their current policies, and this has insurers actively looking for new business.  Competition between insurance companies tends to increase during this time which has buyers looking at more options to place their business.  Because these insurers are looking to acquire more business to drive sales, underwriters will usually accept more risks than usual and better rates.

What does this mean for the insured?  Well generally, this is good for buyers of insurance products.  Premiums are lower, and as a result, this allows insureds to have better coverage at lower prices.  Insurance companies are competing with one another to offer better rates as a buyer incentive, so insureds really benefit from a soft market.

Then Things Get Hard

Things can’t always be the best for the insured, however.  Insurance companies need to make money so that they can continue to provide valuable coverage to buyers.  When there is an influx of insurance claims paid out by many insurance companies, we start to see the market shift gears.  Underwriters start becoming more stringent with their rating policies,  and this makes it harder for previously insured risks to be available at such low prices.  This usually happens after a natural disaster that has insureds looking to their insurance companies for reimbursement. 

After a tropical storm has passed through an area and done some significant damage, people start to buy more insurance and the coverage becomes more in demand than usual.  But, because so many claims have been paid out, in order to balance things out, insurance companies become less willing to offer coverage for certain risks.  Currently insured risks come under review and are re-evaluated to meet revised standards of underwriting.  When there are more buyers in the market than sellers, this is evidence that we are experiencing a “hard market.”

What does this mean for me?  Generally when we see a hard market, premiums increase and insurance companies start to balance out to equilibrium.  They experience less losses because they are insuring less risks, and profits increase.  Then, as insurance companies yield more profits, underwriting guidelines begin to shift again, and the cycle starts to revert back to a soft market.

So Where Are We Now?

We have gone through a long period of a soft market.  But after various natural disasters and high numbers of claims being paid out, experts are starting to see a shift in the cycle.  A Hard market is in the making and it is the duty of insurance brokers (independent agents) to inform their insureds about their options as we travel into the future.  We know that it is ludicrous to believe that buyers will be willing or even able to handle an increase in their insurance policies.  But although it seems there won’t really be a choice, in reality, there is.

The choice is ultimately yours.  If a hard market really is on the way, then you can choose to wait it out and take the premium increase.  But if you cannot afford the first option then this is where a discussion with your agent comes into play.  You may not be willing to take an increase in premium, but how about an increase in risk?  Changing your deductibles or coverage may leave you susceptible to more risk, but it can help you keep insurance within your budget if things start to change and the market begins to harden.  Looking at some extra coverages and either reducing their limits or temporarily eliminating them is something that speaking to your agent about will prove beneficial, or at the very least, informative.

Don’t Be Scared.

If you feel I have thoroughly frightened you and given rise to a new worry in

A "Cat" on the Back

your life, just take a deep breath and relax.  It’s unsure when a hard market is near or far, but it’s good to be prepared.

The Concerned Insured: They aren’t called “On Purposes”

I got into an accident and now the person I hit wants to sue me for damages.  What now?

Oops...

Call your insurance company.  If you have liability coverage on your vehicle, your insurance company will cover your legal expenses amounting only up to your policy limits.  Insurance policies are split up into different coverage limits.  The State Minimum coverage is the least amount of coverage you can purchase.  While less expensive than the higher coverage alternatives, this extra coverage could mean the difference between being covered and paying out of pocket.

I’ve just been in my first accident but my driving record is clear.  How much will my premium increase?

The amount that your premium increases depends on the severity of the accident.  Things that are taken into account include:  The number of vehicles involved, the number of persons involved, speed, damage, fault and much more.  If a vehicle is deemed “totaled” by the claims investigator, it means that the vehicle is not drivable and that the cost to repair the vehicle would be greater than the vehicle is actually worth to replace.  Older cars tend to fall into this category, but sports/luxury cars can add up to some serious money needed to replace or repair.

Many standard carriers offer “Accident Forgiveness” as a discount to drivers who have a clean record, save for one accident (so long as the accident did not involve substances/alcohol).  You can scour the internet to find out which companies offer this discount, or you can speak to your independent agent and have them do that research for you.

And lastly, if you are deemed “Not at Fault” for the accident, you will not be penalized under your insurance policy.  The other party’s insurance will cover the damages to you or your vehicle at no expense to you.

I just got hit by a deer.  Is that Covered?

It is, but there is a catch.  Every insurance policy will have liability limits that determine how much your insurance policy will pay out to another party for damages/injuries.  This limit does not, however, cover damages to your vehicle for an incident like taking antlers to the passenger side doors and windows of your vehicle.  The only way you are covered is if you have collision coverage.  Collision coverage is represented as a deductible on your declarations page.  Your deductible is the amount you will have to pay out of pocket before your insurance coverage kicks in and takes care of the rest of the costs.

Watch for Deer

The deductible must be paid in full first, after which point your insurance company will cover expenses to repair/replace up to the coverage limits of your policy.  Let’s say your deductible is $250, and you have $25,000 for property damage coverage.  You would pay the deductible to get new doors and windows, and the insurance company will take care of the rest, until that $25,000 is exhausted.

What about Cats?

Silly Cat

Unfortunately, there is no coverage through your auto or homeowners policy that will cover your domesticated pet if struck by a vehicle.  Maybe some day in the future, that will all change.  In the meantime, here’s a picture of a cat.  Keep those pets safe!

A Little Poem

Almost time for pudding,

Almost time for cheese

Almost time to criticize

The way I stomp my feet.

Almost time to take a break

Almost time to scream

All these things come rolling in

The countdown starts at three.

Busy fingers lifting,

Christmas music playing

Along with that goes my mind

It is slowly decaying.

Gifts to buy and rifts to cross

Taken step by step

Odes to speak and love to keep

Avoiding the inept.

Gallavanting ’round a tree

Presents neatly stacked

Greedy eyes burn to know

In each, what has been packed.

Fire burns and wine is flowing

Voices carry far

Children hide from jovial laughter

Someone grabs a guitar.

Raining feathers from the clouds,

Some may call that snow

Windows closed and knives are drawn

Time to cut the roast.

All are here and all are smiling

Faces stuffed with food

Crumbs falling, bellies bulging

Picking up the mood.

Children are sent to their beds

Adults awake to plot

How to get the hidden gifts

Without getting caught.

Daddy snores upon the couch

The dogs they join with him

Somewhere in the basement

Mommy’s hands filled to the brim.

Morning cracks the night

Mom n pop asleep

Kids awake to find their gifts

And open them without a peep.

And what do they find

In their festive red stockings?

Not what they expected

So they sit there gawking.

Bundles of black

Dirty and stinky

Coal fills the stockings

And they weep in their nankies.

Mom and dad smile

Not because they are cruel

But because they know better

Because they are cool.

For waiting downstairs

Lay the real surprise

If the kids would grow up

And wipe dry their eyes.

“Be quiet you kids,

I’m trying to sleep.”

Says daddy when he hears

The children weep.

“But daddy it’s Santa,

He’s left us some coal.

I knew I should have stopped

When my belly was full.

I ate one of his cookies

That’s got to be it

But I did him a favor,

For he’s fat as a blimp.”

“Or perhaps it’s your fault,”

Says Dad with a grin

“Making it your job

To turn Santa thin.”

He turns the other way

And in seconds he’s snoring

But the kids are now curious

This can’t be Christmas morning.

“Are we dreaming?”

They ask, now starting to see

What they had not noticed before

Under the Christmas tree.

They look at each other

Suppressing a scream

Maybe this “Santa”

Isn’t so mean.

Wanting to run over

They go back to their rooms

And wait there patiently

With the smell of coal fumes.

When the parents get up

The kids will go wild

Finding new things

Only cool to a child.

They will laugh and they’ll play

There will be much to tell

Deception’s been played

And played very well.