RATE INCREASES, LOSSES, CLAIMS, AND ATTORNEYS FEES, OH MY!!!
2018 started off with a bang! Insurance companies are going crazy with losses and claims activity, partly due to the fires and other social conditions currently wreaking havoc in California… HVH Insurance Services recently received the rate filings report from the California Department of Insurance which shows us what insurance companies are filing to raise rates (or lower them). So, we figured we would share with you what the industry is hoping you don’t notice!
The problem is, the DOI (Department of Insurance) is totally overwhelmed by the sheer volume of rate filings (requests from insurance companies to change their rates), that they still haven’t approved some requests from more than 6 months ago… this could mean double rate increases on your next renewal or worse if the insurance companies can’t get their losses under control.
So what’s causing this? Why are the “greedy” insurance companies trying to charge us EVEN more? California’s wildfires are estimated to cost over $3,000,000,000 (yes billion) in damage, combine that with ever increasing Auto accidents and deaths in 2017, you have a perfect storm that some carriers are NOT prepared to grasp. This is leaving them on the back foot and struggling to keep the coughers full! It’s all about the dreaded “LOSS RATIO”. A “Loss Ratio” is the amount of money in claims a company pays out vs. how much it takes in premium. For example, a 100% loss ratio would mean for every $1,000 in premium the company takes in, it’s paying out $1,000 in claims… it’s not making money, in fact most insurance companies are only breaking EVEN if they have a 75% loss ratio or less! ($1,000 in, $750 out in claims) That 25% goes to the cost of administration and so on, but I digress… Most companies are quite happy when they pay out less than 50% in claims.
However… Most carriers in this state are hovering in the 90-125% or more loss ratio and thus are bleeding money hand over fist in claims. They HAVE to raise rates just to stay above water. This isn’t a problem in all states right now, but in California it’s a major issue. One that may only be remedied in the next 3-5 years. So for at least the next 3-5 years, expect to pay a bigger price when you purchase your auto or home insurance.
Additionally, don’t be surprised if you start seeing claims denied more frequently, companies crack down on using the wrong address, unlisted drivers, traffic violations, plumbing, roof, HVAC and electrical age in your home, etc. Anything that they can use to increase your rates, or use as an excuse to deny claims, they will! That’s why it’s even more important to make sure your policy is written correctly, if you aren’t sure, lets us know, we would love the opportunity to earn your business and make sure you are properly protected.
***See PDF filing right off the DOI website, in the far right column you can see the percentage rate increase/decrease each program/company is requesting… Not sure what you are looking at? Give us a call and we can walk you through it. CA DOI Filings 2017 – Personal Lines – Sorted by Carrier Group