Personal Insurance Blog

The National Oceanic and Atmospheric Administration (NOAA.gov) recently updated its list of storms that caused over a billion dollars in damage in the U.S. That number stood at 12,  more than the entire decade of the 1980s. There were massive tornadoes throughout the spring and summer, flooding along the Mississippi and Missouri Rivers, wildfires in Texas and Arizona, and of course Hurricane Irene. Internationally, the situation was even worse: the Wall Street Journal reported recently that 2011 was the worst year ever for global weather related disasters, causing over $350 billion in damages, interrupting supply chains, and putting a drag on international economics.

Here in Massachusetts, we experienced several destructive weather events in addition to one of the national twelve, Hurricane Irene. Our long winter saw a series of storms through January and February causing traffic accidents on our roads and ice dams in homes that resulted in the most expensive winter damage in years. In June, tornados ripped through western Massachusetts from Springfield to Worcester, and in late August Hurricane Irene caused widespread wind damage, flooding and lengthy power outages. Most recently, the Halloween snow storm dropped a half foot of heavy snow on trees and power lines throughout central and northern Massachusetts causing more damage. It was a bad year for many home and business owners, but much worse for the insurance industry.

Insurance companies in Massachusetts are all licking their wounds from 2011, just wishing it will be over. At one prominent Massachusetts homeowners carrier, 2011 caused more losses than all their net income over the past ten years combined. 

What’s this mean for consumers? And what can you do about it?

What it means is that property insurance companies homeowners and other building insurance will be increasing rates in 2012. They all got hit. Looking forward, the cost of reinsurance, the insurance that insurance companies buy, has already trending higher as investors in these pools demands better returns. The effect of limited supply and higher demand for reinsurance from retail carriers drive these prices up. The average increase is between 8% and 10%; more if you had a claim.

What can you do? Ask your broker or agent to shop your insurance. Some companies are raising rates more than others, and it pays to have a look at the market every few years anyway. Consider also opting for a higher deductible. If you’re willing to take a little more of the risk and share the pain of a loss, the insurance company will charge you less.  

You can also take steps to protect your home directly. This makes sense especially if you have a high deductible or want to protect the “no loss credit” you may already enjoy. If you have old trees in your yard, consider hiring a professional to trim or cut them down altogether. Make sure your gutters are clear of leaves before the cold weather comes to minimize ice dams. Longer term, the next time you have your roof re-shingled, have the roofer to install ice and water shield across the entire roof (also to protect against ice dams). If your budget allows, consider having a generator installed to avoid food loss or to power that sump pump that keeps your basement from flooding. All of these steps can lower your long term cost of risk, including reducing what you pay for insurance.

The most important thing to do is talk to a professional agent who knows your situation and knows the market. Insurance companies come and go into markets. Be sure you're with one that prices to remain attractive in your community.