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Ok, Ok, I will tackle the elephant in the room! But be WARNED, some of you may not like my answers. Also, keep in mind that this is a generalized overview of the items that affect premiums and not a complete list, and is in no way determining whether you have a valid claim.
First and foremost, insurance is a financial responsibility, sold through financial contracts designed to make you whole in the event of a loss. This is important to understand, since they are legally binding contracts and the premiums that we as consumers pay for these contracts are subject to increases or decreases based on the insuring companies experience in the marketplace. In other words, if an insurance company experiences unforeseen losses that exceed the insurable risks, they are losing money and are forced to raise rates.
HOME:
Let’s start with HOME INSURANCE as this is the hottest topic in Florida right now. HOME INSURANCE in Florida is first and foremost affected by the fact that we share in a pool risk with other Florida HOMEOWNERS. What I mean by this is, if you have XYZ Insurance Company, your premium payments are part of a pool of money with other XYZ Insurance policyholders. This way, if you insure your home with XYZ INSURANCE company and it burns to the ground the next evening, your claim will be paid. Vice versa, if you did not pay into a shared pool of premiums, and you had a claim, you would not have paid the insurance carrier enough money for your claim to be paid. This is magnified even more here in Florida, since we do not share in a “National” pool of premiums like many other states do. We used to, but those days ended back in 2007. Ever wonder why companies like GEICO don’t offer GEICO home insurance policies in Florida?
Another important factor that affects home insurance premiums in Florida, is the fact that we sit between two large bodies of water. This means that at some point we are going to get hit with hurricanes. When they will hit, where they will hit and how bad they will be is anyone’s guess. With that said, where you live in Florida affects your rates as well, due to the previous sentence. The further south you go and the closer to the coast you get, the more expensive it gets. In addition, older homes and homes with older roofs are more expensive due to their ages. Again, this is because of the hurricane component.
The single largest factor that has affected home insurance premiums in the last 24 months is the increase in fraudulent claims, and excessive lawsuits. Often times, I hear people say “you aren’t the one that has to pay for the claim, it’s the insurance company”. Unfortunately, that isn’t the case since we all share in the pool of premiums. If XYZ insurance company starts to have excessive losses and/or fraudulent claims with their homeowners’ clients, they raise their rates on all their clients to compensate for it. This is an important factor when you consider that an insurance carrier does not have to be found guilty to pay out. They just have to settle a claim. This is where the Assignment of Benefits comes in to play, especially, with roof claims. Often, it is less expensive for the insurance carrier to pay the claim, than it is to fight it, regardless, of whether it is legitimate or not. Many company’s and legal professionals have discovered this and are now taking advantage of it.
Many of the above items are what have led to the recent unprecedented number of home insurance carrier bankruptcies and rate increases.
PRO- TIP:
- Get a wind mitigation inspection done if your home was built pre 2001 or has had a new roof put on it.
- Maximize discounts, bundling home and auto can help lower the rates.
- Review your coverages, to make sure they meet your needs
- Look at your deductibles and make adjustments if necessary.
AUTO:
Auto insurance is a financial responsibility if you drive in Florida. According to recent data, Florida leads the nation with about 26.7% of drivers being uninsured. This is huge, when you consider that Florida also ranks in the top five most expensive auto insurance states on a national average. One of the major factors in the excessive number of uninsured drivers here in Florida, is the fact that there is no real deterrent to driving uninsured in Florida. Yes, once an accident occurs, you are forced to carry certain coverage limits, but at that point, the accident has already occurred, and the claimant is left with very little recourse. In addition, a case could be made that many different people benefit handsomely from this type of insurance coverage arrangement, and therefore do not want to change the insurance laws here in Florida.
While very similar to home insurance, auto insurance shares the risk between lots of different clients. This is an important concept because when you see a person on a billboard who got paid $500,000 for a claim, we all paid for that claim through our insurance premiums. Again, a very important concept when you consider fraud and excessive verdicts. The nice thing about auto insurance as compared to home insurance, is that there are more individualized components to it when compared to other insurance products. I was once told by a Fortune 500 auto insurance company, that there are over 565 different rating factors for a single auto in one zip code. This means, that while we share in a pool of premiums at the time of a claim, your individual tickets and accidents affect your rates as well. Another item that affects auto rates in Florida, is your distance to a major city. Historically speaking, the closer you are to a major city, the more expensive your rates will be, and vice versa. Two other items to consider, when looking at your auto insurance is, youthful drivers and the type of vehicles you have. As you can imagine, youthful drivers have less experience, and are therefore, a greater risk. In a similar manner, the more expensive a car is, the more expensive it is to insure. If your bumper has 4 cameras in it, and you are “bumped” at a red light, it suddenly becomes an expensive claim.
PRO – TIP:
- Most auto carriers offer a discount for (B)-average or better grades for youthful drivers.
- Consider offering an incentive to youthful drivers if they maintain their discounts. Example, parents pay for a portion of their auto insurance if they maintain certain grades.
- Reiterate “Don’t text and Drive” to members of your household.
- Consider the car, most 4 door sedans and SUV’s are the least expensive to insure.
- Most 4WD’s, sports cars and heavy vehicles are the most expensive to insure.
- Small claims add up. Don’t “nickel and dime” your policies. If you have 12 towing and labor claims in two years, your carrier is most likely going to increase your rates since they are having to pay for them.
DO NOT TRY TO BEAT THE SYSTEM
I often tell clients, if you have had that thought with regards to insurance, I can promise you the attorneys who wrote the insurance contracts have had that thought as well.
- Don’t try to put your teenager on their own policy. It will be 6 times more expensive, as they loose all of their discounts.
- Disclose all of the drivers in your household. You don’t want problems at the time of a claim.
- Multiple PIP claims affect eligibility and rates
- If you use your car for any type of business, let your carrier know.
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About the Author: Matt Welch
I am a husband, dad, business owner, insurance agent, and an anything outdoors person. I am a lifelong resident of Florida and grew up in Ormond Beach, FL. I attended Auburn University majoring in both Business and Economics.
