Cheap Insurance

Although the insured behavior can influence the policy premium, it’s more likely to have the climate change impact the bottom line.

California had an earthquake in the midst of another fire this past week.  You may have seen all the coverage on the fire – at least in the entertainment news.  But the earthquakeCoins under umbrella. didn’t make much a showing.

I got several calls from agents in California about possible restrictions and price jumps.  This got me thinking about the disappearance of the ‘cheapest rate’ type of commercials recently. In the first place, it’s all very misleading.  The ads on television lead every insured to believe that their policy and rates are only affected by their behavior.  Which is not how insurance works.

As if that promise of a ‘cheap rate’ is going to save the insured the premium increases incurred due to the multiplying blizzards, hurricanes, wild fires, earthquakes and heavy flooding rains.  It won’t.  Period.

When I look at the JD Powers list I see ‘cheap rate’ insurers either way down on the list or, well, missing completely.

Why is that?  Eventually, the reserves are going to run low due to the claims.  How will they be replenished?  More importantly, if the insured hasn’t had a claim and they’ve been that ‘good risk’ you have insisted they be, how are you going to explain the increase in rates?  You can’t have both.

If you don’t have good claims handling how are you going to make good in the press? No, the ‘poor underwriting’ or the ‘we weren’t charging the correct rates for the liability before’ new releases is not going to explain it.  The advertising executives and spin doctors are going to have to come up with something different.

Climate change is encroaching on the ‘cheap rate’ insurers.  Go ahead look up climate change, you’ll find this right on Google – “The chairman of Lloyd’s of London has said that climate change is the number- one issue for that massive insurance group.”

Lloyd’s of London started in the late 1600’s.  That would be during the Glorious Revolution – back when Quakers were protesting and while Catholics and Protestants were battling it out.  They didn’t wake up one day during the 1920’s and decide to make money.

As an agent, price increases and bad claims are not something you want to explain to any insured.  It may be less legwork for you if the insured knows up front about price increases and the way of insurance.

Leave a comment and tell us about your experience with rate changes.

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