Posts tagged ‘Gulf Coast Hurricane Housing Recovery Act’

August 7, 2009

Dropped Home-Owners Insurance Policies

To accent the recent consideration take upon State Farm to drop the coverage plan of ‘home owners’ insurance has me considering and wondering the exact reasoning behind the whole idea.

For starters the timing can be no less coincendental than that that signified the start of hurricane season as well as the impact of property tax increases considered for counties through-out the nation. As one may recall hurricanes and insurance premiums don’t really mix well when the consieration of a financial out look is exclaimed. Since the devastation of hurricanes Katrina and Rita, the Federal Government has committed more than $110 billion to support public assistance groups to stimulate growth and encourage development during that specific account devistating destruction. So how did the insurance industry pan out after such an account of devistation?

Taken together, Hurricanes Katrina and Rita are by far the most costly natural catastrophe in U.S. history, with estimates of insured losses now exceeding $60 billion. The previous record for insured losses is held by Hurricane Andrew, for which insured losses totaled $21 billion (in inflation adjusted dollars).
This disaster will have an enormous impact on insurers, who face far greater exposure from this loss than they have from any other natural disaster in history. Unlike Hurricane Andrew and the series of hurricanes that hit the Florida Panhandle in 2004, which primarily affected residential property, Hurricanes Katrina and Rita have caused an unprecedented amount of damage to industrial (largely oil and chemical-related) and commercial property. That means impacted businesses will face longer and therefore more costly business interruption losses, complex contingent liability losses, and untold amounts of extra expenses incurred in an attempt to restore business operations. Insurers may also be further exposed due to the absence of state reinsurance programs, such as Florida’s program that reportedly paid insurers $3 billion following last year’s hurricane losses.

What this adds up to is heavy losses for insurers, and in such circumstances it can be expected that the insurers will seek every available avenue to limit their losses, including denial of potentially covered claims.

So what is an actual home-owners insurance policy?

The reason I ask this question is because one would think that home owners insurance should carry the same validation as car insurance. The basics, such as p.i.p and incidental coverage, then get more involved such as increased personal claims coverage and expected hospitalization stimulus/ repair incentive a.ka. full coverage packaging. However it seems that that concept is wrong as each and every account of a dropped policy comes the tale of misconception of water damage and flood damage and the infamous wind coverage assumption that is to be added to the standard home owners insurance rate in oder to claim any damages that may arise during the case of an occurance such as a hurricane. In some cases the occurance could be a tornado or just the mishapes from a simple thunder storm in the consideration of lighting stikes that have taken homes and left families with dropped insurance policies.

So with the added additions that have to be made in order to even claim such damages against homeowners coverages how has the losses become so high of a risk towards companies?

The Insuring Agreements, which define the scope of coverage and the triggering incident—the occurrence of injury or damage, the offense, or the making of a claim against the insured—which brings the policy’s coverage into play. Policy Exclusions, which limit the applicability of the insuring agreement with respect to specific types of injury and damage. Limits of Insurance, which specify how much the policy will pay on behalf of the insured for each covered claim. Policy Conditions, which define the rights and duties of insurer and insured under the policy. All are factors that need to be considered when over-viewing a policy to insure the best coverage in the time of such an incident as considered in the total over-view of devistation caused during hurricanes Katrina and Rita.

There are certain considerations that keep privatizes insurance companies such as State Farm from being able to pay out what may be expected as a considerable pay-out for the loss/damages assumption of ones policy. Giving reason behind the consideration of dropping some policies just to keep there heads afloat under the assumption of financial gains. If your demand is higher than that of your current supply till then you put your-self in a bind of considering a scope of potentials and projections. Point in case the current assumption of the losses from hurricanes Katrina and Rita. Where is the money coming from to pay out the losses/damages rates in such a case as hurricanes Katrina and Rita?

You pay home-owners insurance once a month just as car and any other specific policy that you may have such as health or life insurance, so is that to say that in the cases of hurricanes Katrina and Rita that a particular insurer could pay-out lossess/damages in the amount of 3 to 4 million to cover the estimated amount of ones policy package? It’s not an assumable assumption to be made.

This just might be why insurers such as State Farm are dropping coverages such as home-owners to keep from turning belly-side up especially during a time as such as a recessed assumption.