Focused on Risk

Another rate increase? Why are insurers increasing rates again??

We’re all experiencing rate increases this year on our home, auto and umbrella policies.

Why, is it the big insurance companies desire to increase their revenue and pay their CEO’s big bonuses or is there an explanation we can all understand?

Hurricane  Irene is the 10th US weather disaster this year to have caused more than $1 billion in damage. This is the most damage for any year on record for 30 years.

Excluding Irene, this year’s natural catastrophes have caused about $18 billion in damage to insured properties according to the Insurance Information Institute. Irene will add $3 to $5 billion.

In a normal year, industry losses typically total $15 to $20 billion. The peak hurricane season is only half over, with the possibility of more storms and more losses.

Another reason insurance rates are expected to increase is due to the fact reinsurance companies are set to increase their rates effective January 1st.  Reinsurance is coverage that insurance companies buy to cover their potential losses from catastrophes. This year reinsurance hasn’t offset insurance companies’ costs. Reinsurance doesn’t kick in until a single disaster’s costs to insurers are more than $10 billion. When the billions are spread over several disasters, as happened this year, insurers and their customers must absorb the costs.

We all need to get ready for the higher rates and budget for the increases. Blame it on natural disasters, NOT the insurance companies.