Hurricane Damage, and what it could mean for the rest of us.
Now that hurricane season has come to a close, it is time to reflect and get an understanding of what this could mean for the consumer's future. North America was directly hit by three catastrophic storms, Harvey Irma and Maria, during the 2017 hurricane season. This resulted in people losing their homes, vehicles, and businesses across the country. Munich Re, one of the largest reinsurance companies in the world, has projected $100 Billion in property damages from these three storms, but what does this mean for consumers moving forward?
The insurance industry is one big numbers game. The insurance companies evaluate the risks that they provide coverage against and apply premiums based on the level of exposure. However, that doesn't mean that coastal areas are the only places that will see increased insurance rates. In an effort to rebuild their reserves, the insurance companies will increase rates across the board with the largest increases in the effected areas. Some companies will pull out of writing in coastal areas all together which lowers competition and drives premiums up.
For an example, since GrayStone focuses on the hospitality industry, I will use a scenario that happened a few years back in the restaurant and bar business. Back before 2010, there were tons of companies wanting to cover restaurants and bars so we had plenty of options to pick the coverages we wanted and price the companies against each other which drove premiums down. All of a sudden, claims started rolling in across the country on this class of business due to Personal Injury Lawyers targeting this industry. Companies started pulling out of writing coverage for these risks which caused what we call a "hard market". Since very few companies continued to write restaurants and bars, there was no competition between carriers and they could charge whatever they wanted. I had tons of clients that had been in business for ten to twenty years and never had a claim, but were seeing premium increases beyond the normal inflation rate. Not only were their premiums going up, they started losing coverages as well. When companies get hit with a lot of claims on a specific coverage, they review their policy language and either limit that coverage or exclude it all together.
My father has been in the insurance business since the late 1950's and has seen huge changes in the industry over time. He told me, that back when he started working with restaurants and bars, liquor liability coverage was excluded but could be bought back for an additional premium of $100. For those of you that are not familiar with this coverage, it protects the establishment in the event that a patron who has been served alcohol leaves and gets into an incident that causes personal injury or property damage. Today, this same coverage that could be purchased for $100, is the most expensive policy for a bar or club. Another example is assault and battery coverage which used to be an included coverage in the policy. Now this coverage is extremely expensive to purchase if the company will even offer it.
I have already started seeing increased premiums on the property side and heard of companies pulling out of writing coverage in coastal areas. With that being said, I highly encourage reviewing your policies and shopping your insurance at renewal to make sure you have the best coverage at the best rates.