From hurricanes to wildfires, 2017 was a devastating year for many families and businesses nationwide. You might be feeling relieved that you made it through such a horrific year of natural disasters unscathed. Well, don’t get too comfortable because you may still be affected by last year’s disasters through your property insurance premiums.
After nearly a decade of decreasing property insurance rates, insurance companies are seeking to ride the momentum of these losses to drive rate increases. And, so far in 2018, we’ve seen insurers attempt to increase rates by about 10%—even for properties a thousand miles from any turbulence. And for properties located in regions of the country that are CAT exposed, insurance companies are seeking rate increases of 20% or more.
That’s the bad news. The good news is that, unlike the weather, you can do something about insurance premiums. Below are four tactics we are finding most useful in getting the best deals in property insurance this year.
Review your statement of values
The statement of values is a part of a property insurance submission that lists the value of everything being insured, e.g., building, equipment, etc. Typically, this comes in the form of a spreadsheet with lots of columns asking questions about each aspect of the property, such as the type of construction or the nature of any protection.
The most important step towards getting the best result on property insurance is to obsessively answer every question. In the past, many insurance applicants left many cells blank or gave very general answers, which in a very competitive market didn’t hurt much. But now, insurance companies are being more rigorous in assessing potential risks using sophisticated computer models. And the statement of values is what the models use to calculate an estimated annual loss (AAL) for each property. From past experience, these models have determined that some seemingly minor details can have a big impact on ultimate losses. For example, it’s significant if windows are made of hurricane resistant glass and if the air-conditioning unit on the roof is tied down. If you’ve taken these and other preventive steps, you’ll save money noting them on your statement of values. A sophisticated insurance broker can help you identify the information you need to gather for your application. At Crystal & Company, for example, we run modeling that helps us predict how underwriters will evaluate your statement of values and price your risk.
Shop broadly for insurers
In good times, some companies decided that it wasn’t worth the trouble to shop around each time their policy was up for renewal. With premiums going down every year, the prevailing thought was, Why bother? This year is different. Appetite for risk varies widely among insurers, and the company that had the best rates the last time you shopped for policies is likely not to be the best deal this year. That’s why it’s helpful to scan a wide field for the best insurance companies approaching both domestic and international insurers.
Meet face-to-face with insurers if possible
We always advise our clients to meet in person with underwriters during the renewal process, and this is all the more important in today’s environment. You’ll find that a day or two of meetings can have a very significant effect on the premiums you will ultimately pay. If an insurance company is going to invest the time to bid for your business, they are going to want to say yes, at a price that you will accept. But to do so with comfort, they want to get to know your company, its properties and your approach to risk management. Nothing helps build confidence better than a face-to-face meeting. We suggest meeting with three to five insurance companies, although some clients with complex situations meet with twice that number.
Consider higher deductibles
In the frothy market of past years, insurers would compete by offering lower premiums and lower deductibles. Companies didn’t have to do much hard thinking about the tradeoff between upfront premium cost and potential exposure. But, once again, this year is different. You should look carefully at the sort of credit insurance companies will offer for higher deductibles. Sometimes this is more than a single choice. We’ve had clients save money by accepting a higher deductible on hurricane damage but keeping the deductible on fire losses the same.
No one wants to spend any more time or money than necessary securing insurance coverage. But with a year of potential rate increases ahead, you’ll be able to minimize your costs by spending more time evaluating your insurance options.
Robert DeRosa is a Senior Managing Director and National Property Practice Leader with Crystal & Company based in Houston.
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