Who decides when homeowners rates go up, down, and when it’s time to leave town?
Last we checked, nobody wants to receive a notification of an insurance rate increase, that an insurance carrier has decided not to renew, or worse, cancel your policy. Yet, it still happens, and of course it’s only natural to want to know why and who’s to blame. We discuss this topic often in our agency and think it’s worth outlining for anyone interested in clarification.
First thing’s first. One cannot cover the origination of insurance rates without addressing the Department of Insurance (DOI). Every state has their own DOI, and their role is essentially to regulate the insurance industry in each respective state. Amongst other things, they are the ones who make the laws surrounding when and what insurance coverages are legally required, and they also determine the maximum rates that can be charged to consumers for insurance coverage.
That brings us to the other group of key players involved in the determination of insurance rates: the companies that actually provide the insurance coverage, also collectively known as insurance “carriers.” A few examples of who we’re referring to when we say “insurance carriers” include Nationwide, Progressive, Travelers, and Allstate. These are the companies that receive your payment funds, otherwise known as insurance premiums. Carriers are also the parties responsible for paying out claims to their policy holders as purchased coverage, deductibles, and limits permit.
Furthermore, each “carrier” company has their own underwriting department. This is basically a team of individuals that analyze all sorts of complex data in order to determine which geographical areas will be profitable for their company to offer insurance in. They look at both historical and predicted weather patterns, as well as land characteristics like proximity to the coast, likelihood of fires, crime rates, and even real estate market trends. Underwriters also come up with the criteria their insurance company uses to decide which homes and homeowner characteristics they are willing to insure, including a list of specific qualities used to factor discounts or increases that apply to the going rate they’ll charge for their coverages. For example, some carriers do not even offer coverage for homes in specific zip codes, those with roofs that are older than a certain age, or in conditions they have determined through inspection to be unacceptable. Many carriers also factor in your personal credit score and take your history of insurance claims into consideration when calculating your rates, too.
At the end of the day, private insurance carriers are like any other for-profit business: their main goal is to make money. Even with all the advancements in modern technology, it’s still impossible to fully predict mother nature and other unknown factors. Thus, who and what their underwriters decide they will or won’t insure, and for what price, is constantly examined and ever-changing. When a natural disaster like say a hurricane, flood, or a tornado comes along and causes a bunch of damage to an area, this can trigger an influx of insurance claims that a carrier has to pay out to their policy holders. If and when providing insurance in an area is no longer a profitable endeavor for a carrier, they may opt to increase their rates moving forward in order to balance out the losses (as long as they don’t exceed what the Department of Insurance will allow them to charge) or halt the sale of future insurance policies in that location until further notice or indefinitely.
Before wrapping up this topic, it’s important to shed light on one more relevant distinction, and that is the comparison between working with a “captive” insurance agent to purchase your insurance policies versus partnering with an “independent” agency. Unlike an independent agency who can quote and sell policies insured by a wide range of different insurance carrier brands, captive agents such as State Farm reps can only sell that one brand of insurance. The same concept applies if you decide to buy your policy directly from one specific carrier like Geico, for example. As you can imagine, that can become problematic for the homeowner if a carrier decides to make drastic coverage or rate changes in their area. Ultimately, it is in the homeowner’s best interest to work with an independent agency because this allows them to change out carriers as needed, while keeping their preferred agency of record and favorite local contacts consistent. But not just any old independent agency will do! A good independent agent keeps up with all changes made by insurance carriers who offer coverage in your area – and they add and remove recommended carriers based on evolving needs and performance, too. They should know which carriers are currently offering the best pricing considering all the statewide and underwriting variables and can quickly match your specific homeowners coverage needs up with the right policy, regardless of inevitable ebbs and flows.
So, if you’re feeling annoyed by an unexpected rate increase or cancellation notice, we hear you! You are certainly not alone, and we are here to help navigate the next steps. As an independent agency with many clients residing in coastal communities, we see carriers come and go and the best rates fluctuate from one company to another on a regular basis. Our job is to ask the right questions, thoroughly understand the current options, and recommend optimal coverage solutions that adequately protect each unique homeowner.
At Sheally Insurance Group, we work for our clients (and only our clients) and understand that everyone’s risk is different. It’s the reason we are structured to offer many different carrier brands of insurance, and why our entire team is constantly working to ensure that we are able to provide reliable coverage options in the communities we serve at any given time. We know from experience that what works well today may not be the best solution a year or two from now. Our goal is to earn trust and establish lasting relationships with our customers. If we can provide additional guidance or help you secure the right coverage and best rates in your area, please let us know. We are always happy to help make your experiences with insurance as easy to understand and pleasant as possible!
Written by Allison Sisson - Director of Marketing