Headaches are known to be caused by things like dehydration, malnutrition, stress or lack of sleep. But if we had to guess, home owners and those affiliated with the real estate industry have experienced a headache lately that can be blamed fully on the current state of home insurance. As much as we don’t like or agree with the challenges home owners are facing, we can provide a little insight as to why things are the way they are.
To put a quite complicated issue simply, it really boils down to three things:
Fraud – Roofing guidelines have gotten more and more strict and it’s in large part due to an unfortunate amount of claims filed unnecessarily for roof replacements. The involvement of roofers themselves, public adjusters and the misuse of the Assignment of Benefits tool have all contributed to an increase in claims that insurance companies have struggled to sustain through. Profitability and the ability to pay legitimate claims are down, making insurance companies unable to be there for consumers when they need them the most.
Litigation – Property claim payouts have been cited to be up to 4.5 times more when an attorney is involved. Over the past 9 years, approximately 71% of the billions of dollars paid out on property claims when to attorney fees. This one speaks for itself.
Reinsurance – Approximately 40-45 cents of every dollar of a homeowners insurance premium goes toward the cost of reinsurance. This is the insurance that insurance companies buy to protect themselves from overwhelming losses in larger claims and catastrophe situations. When insurer’s expenses are up this high, one of the only ways to compensate is to increase premiums.
It’s safe to say that everyone involved in the insurance, real estate and associated industries agrees that something has got to change. There are people unable to accomplish homeownership or being priced out of opportunities because of these issues. At this time, the reform bill that the Senate presented to the House has been postponed until either next session or a special session, should the Governor call for it. Therefore, there is little to no control over the situation other than hoping for legislative action to be taken sooner than later and spreading awareness to minimize fraudulent and litigious activity.
Hang in there, guys. You make think home insurance is quite a necessary evil at this point. And while the necessary part is true, it isn’t all evil… we’re actually here to help and advocate for home owners. We can get through this together.