According to the Wall Street Journal Online, some insurance companies are now passing along the higher costs of payouts resulting from hurricanes such as Katrina, Wilma and Rita to homeowners. In fact, some insurers are withdrawing from coastal areas altogether, after incurring an estimated $56 billion of hurricane-related losses. With long-time insurers such as Allstate Corp. and Nationwide Mutual Insurance Co. leaving some vulnerable areas, homeowners are forced to find new insurance coverage that usually comes with a higher price tag.
With home insurers getting regulatory approval to increase premiums in states hit by hurricanes, even states that were untouched by hurricanes are expected to bear the brunt of this hike. Citing increase in reinsurance costs as a major contributing factor, many insurers such as Allstate are seeking approval to increase premiums in as many as 49 states.
Insurance Companies are now reviewing their underwriting process and trying to enforce stricter guidelines on whom to insure. Industry experts estimate that insurance premiums will climb even higher when homeowners renew their policies this year.
Insurance premiums have already increased in Massachusetts, which hadn't experienced a devastating hurricane in the last 50 years. Moreover, some insurance companies are not writing new policies in areas such as Cape Cod, Nantucket and Martha's Vineyard. Homeowners living in these parts are forced to seek state insurance to cover their homes, which usually costs more than private insurance.
Homeowners in several states are bracing themselves for likely rise in premiums due to increased reinsurance costs. Rhode Island has already experienced increases in home insurance premiums by 10 to 15 percent over the last year. Insurers are reducing risk exposure by shifting some of the financial risk to homeowners with higher deductibles for windstorm damage.
For homeowners, dealing with the premium increases must be familiar territory. Premiums have been going up over the past few years following natural disasters in the 90s such as Hurricane Andrew (1992). According to experts, the best path for homeowners to tread is to go for policies with higher deductibles and lower premiums. Homeowners should avoid filing minor claims, which may increase their risk of being dropped by their insurer. It is also best to buy home insurance from firms with a strong financial rating.
Source: The Wall Street Journal Online, M.P. McQueen
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