You may have noticed that your insurance rates are rising this year. Why is this? Well, in broad terms, it’s a matter of supply and demand. There are fewer insurance companies offering insurance than in previous years. Additionally, Florida is growing - both in terms of population, and in terms of property values - all resulting in an increased need for insurance. So the supply is lower, while the demand is growing.
Soft Market vs. Hard Market
Of course, there’s more to it than that. And to understand the economics of insurance, it’s helpful to understand what we refer to as ‘Hard Markets’ and ‘Soft Markets’.
Soft Markets are when we have a higher supply of insurance available, resulting in lower premiums. Soft Markets usually follow years of profits for the insurance companies. The insurance companies are happy, they’re making money, and so they’re willing to offer more coverage and write more policies. This results in competitive premiums; a good thing for all of us.
Hard Markets are when we have a lower supply of insurance available, resulting in higher premiums. Hard Markets usually follow years of financial loss within the insurance companies (ie. claims). This causes the insurance companies to be more averse to risk; deciding to remove coverages, increase premiums, and unfortunately, sometimes by showing that they are no longer loyal to policyholders and they non-renew policies.
If you couldn’t tell, we are currently experiencing a Hard Market. According to insurance companies, the recent increase in claim activity is a reason for this. In Florida, we have been directly impacted by hurricanes Matthew (2016), Irma (2017), and Michael (2018), with a close call from major storm Dorian (2019). Additionally, many insurers point to an increase in claim activity resulting from unscrupulous contractors and litigators, as well as an uptick in water-related claims. Finally, many of our Florida insurers purchase reinsurance from international insurers, which have been negatively affected by national and world-wide insurance events, resulting in reinsurance rates rising.
All of these factors contribute to the current insurance climate here in Florida. The good news is that hard and soft markets are cyclical. We will return to a soft market at some point in time; but it may take years before this occurs. I understand that may not be the ‘good news’ you were hoping for. However, I can give you 3 suggestions that will help guide you through this current (appropriately named) hard market.
3 Things You Can Do
- Allow us to Review the Insurance Market on Your Behalf. We represent a majority of the insurance companies offering coverage in Florida. This means that we can almost always find you the best value. Some agents only offer one brand of insurance: their own. Choosing an independent agency, like Wren Insurance Agency, gives you the opportunity to explore options from multiple insurance companies, resulting in broader coverage and more competitive premiums. There is value in remaining with the same insurance company for a number of years, but it may also be prudent to consider other options and compare the pros and cons.
- Open New Doors with Updated Inspections When we go to the insurance market on your behalf, it’s helpful to have updated inspections, specifically the Wind Mitigation Inspection, and in the case of older properties, a 4 Point Inspection. These inspections may help open the door to additional insurers who wouldn’t otherwise insure your property. While it’s not fun to pay for inspections, we can usually make it up for you in savings on your insurance. Contact us to us to review your specific situation and to help determine if updated insurance inspections make sense for you.
- Review and Adjust Your Coverages. Lastly, it may make sense to adjust some of your coverages. While we NEVER want to underinsure your home or remove key coverages, sometimes it may make sense for you to ‘take on’ some of the risk yourself in exchange for a reduced premium. I hate that we have to even include this as an option, as you shouldn’t be penalized for the state of the insurance market, but it’s the reality of the situation. An example of this would be increasing your deductible, or decreasing your “ordinance/law” coverage, especially if you have a newer home. In each of these cases, you should to talk through your specific situation with an Agent. Just know that there are adjustments that can be made to provide some premium relief. It is important, though, to keep in mind that taking on more risk may result in having to pay that savings right back out (and then some) in the event of a claim. Our Agents can evaluate the different options available and help you determine the best course of action.
Dealing with insurance isn’t fun – and rising rates can make it especially frustrating. Our goal is to help guide you through the insurance process in a way that makes it as painless as possible, while keeping the focus on protecting you and your family or community association. Please contact us if you have any questions or if we can help you with your insurance needs!