Have you had a rate increase on your home or auto insurance? If you're like most people, in the metroplex, you've seen your auto and homeowners insurance rates spike lately. In some cases, some dallas homeowners insurance rates have doubled. Have you ever wondered why your rates continue increasing, even though you haven't filed a claim? To help you better understand what's happening in the Dallas Insurance market, I've compiled this list so you get a better idea of what is going on behind the scenes at your insurance company.
1. Natural Catastrophes – Increased Reinsurance Rates and Claims Severity
Remember the hail from June 2012 and the Tornades from April 2012? Well, both of these severe storms cost Dallas insurance companies and estimated 2 billion in claims payouts and claims related expenses. So, when an insurance company loses a ton of money, they how do they make it up? Insurance companies have to raise their rates to match increased claims severity. In the end you feel it in the wallet.
2. Underwriting Changes – Insurance companies tighten their belts
Over the past few years, the property and casualty insurance industry has lost money as a whole. During the 90s, insurance companies could expect great returns on their investment portfolio. As a result, they could sell you insurance at a lower price even if no money was made on the initial sale of your policy. When an insurance company reports an underwriting ratio of 106%, that means they lost 6 cents for every dollar they took in. Just like any business, you can only live on savings and credit cards for so long.
When an insurance company loses money, they respond by addressing internal expenses, underwriting new and existing business, and adjusting rates. When a carrier makes underwriting changes, that means they either make it harder to qualify for business, or they make it harder (or easier) to earn their best rates. For the person looking for insurance, that means they have hard time getting good rates if when they shop for insurance.
2. Over Exposed Big Companies
It's not secret that State Farm, Allstate, and Farmers are having problems. In 2012 alone, State Farm Lloyds of Texas announced average homeowners rate increase of 20% while Farmers and Allstate also announced rate increases of 10% and 5% perspectively.
Why are these companies taking such large rate increases? For large companies, the task of adjusting rates becomes more difficult in an industry where making a profit means making pennies on the dollar. According to the Texas Department of Insurance, State Farm Lloyds represented approximately 28% of the written homeowners premium in Texas. As a result, it would stand to reason that they also get at least 28% of all the hurricanes, tornadoes, fires, hail; I think you get my point.
What can you do about your Dallas homeowners and auto insurance rates?
Since forcing the insurance company to make changes is not an option. As a consumer, the only options you have are to take control with your insurance portfolio. Hear are a few things you can do to control your rates; especially if you haven't rate increases.
- Bundle Your Coverage: With insurance companies, two policies are better than 1. The more policies you have with a company, the more discounts. Also, it makes you more likely to get a preferred rate by having your home and auto insurance with the same company.
- Park in the Garage: Many people take this luxury for granted. Parking in the garage or covered parking reduces your chance of being exposd to catastrophic hail. The fewer hail claims, the less that coverage costs in your area.
- Carry higher limits: People that carry higher limits have an easier time shopping for insurance. By carrying 100/300 or higher bodily injury limits says that you're a responsible, preferred customer. Insurance companies like to take preferred clients from other insurance companies.
- Maintain a Clean Driving Record: Perhaps the best thing you can do get good rates on your homeowners and auto insurance is to maintain a clean record and claims history. Insurance companies realize that catastrophes occur, but the more you help reduce the number of claims the better.
- Maintain your home's major systems: Plumbing, roofing, electrical, and air conditioning system maintenance is paramount. Virtually every insurance company wants to know they are insuring a home that is in good shape. Failing to maintain your homes major systems can lead to damage from wind, leaky pipes, collapse from rotted materials, and much more. Word to the wise, maintain your property and don't be surprised if the insurance company sends an inspector to take photos of your home.
The next time you're shopping for insurance, keep these things in mind. Protect yourself from the insurance company's madness. Since, you can't control how much the dow jones yields or when the hail storm will occur, at least you can take a few steps to controlling your rates. If I've missed anything, I would love to hear your thoughts?