Could Hurricane Sandy Cause Your Home Insurance Rates To Rise?

Hurricane Sandy  was a huge and vicious storm that dealt the northeastern US such a severe blow that the clean-up will probably continue for many more weeks and perhaps even months.  Luckily for those of us in North Carolina, Sandy dealt us mostly a glancing blow and for the most part we didn’t suffer huge property losses here.   Despite this though, hurricane Sandy will almost certainly contribute to higher future home insurance rates for you and your neighbors.

   

Property insurance rates for your homeowners insurance policy are promulgated from data gathered from many different sources from your credit score to the construction type of your home to the fire protection in your town.  Weather related past loss experience is also a huge player in this number crunching process.  And as far as weather related losses such as hurricanes go, there are really three ways that you can be affected negatively by these storms.  We can look at each of these three loss impact separately.

The first impact type is really very  simple and direct.  It’s pretty obvious that when your home or property suffers a direct loss from a storm and you have to file a claim that the insurance company is going to review your policy more closely before determining your rate at renewal.  Most insurance companies will allow you to file some number of weather related claims before they take the more drastic step of non-renewing your policy.  Many years ago, some companies might even allow as many as three weather related losses on one homeowners policy if they were all small.  Things have changed quite a bit in the past two years and some insurance companies now won’t tolerate even one weather related loss without at least requiring that you increase your deductible.  Many might just not renew your policy after one weather related loss.

A second, less obvious storm impact on your home insurance rates happens when a storm hits your local area.  Even though your home may be spared the damage, you may still face future rate increases due to this storm.  When insurance companies pay out for a lot of storm losses in one area, you can bet that they start to train their attention on that area and begin to work to get more rate increases there.  So, even when you have dodged the bullet of storm losses, you may not dodge the rate increase bullet caused by that local storm.

The third storm impact for rate increases comes from the fundamental mechanism of how insurance spreads losses around.  Consider that when you purchase home insurance you are substituting a smaller known loss (your premiums) for a larger unknown one (storm damages to your home).  The insurance companies do the same thing with their risks by purchasing reinsurance coverage for their book of policies.  Reinsurance is insurance protection that insurance companies purchase from reinsurance companies on all or some portion of their policies.  For example, an insurance company might sign a reinsurance contract with a reinsurer that says that if they suffer losses from any one storm that exceed $100 million then the reinsurer will pay for all claims over that amount.  Knowing this, you can quickly see that when large storms hit the US and cause extensive damage, the reinsurers have to pay out on their contracts with the insurance companies.  After this has happened, the future costs of reinsurance will be higher as the reinsurers attempt to cover past losses and also make sure that they are profitable going forward into the future.  These higher reinsurance costs are then passed on down to the homeowners insurance consumer.

So knowing all of this, let’s revisit hurricane Sandy.  For most of the North Carolina residents, this storm was a nonevent in terms of damage to their property.  But you can see, this still doesn’t mean that we won’t have to pay for some of these losses ourselves.  The third impact of storm losses tells us that we will see higher rates in our area even though we did not experience many direct losses as a result of this storm.

 At Clinard Insurance Group, we insure thousands of families all across North Carolina.  We are here to help you with your questions and to help you save money on your home insurance, your auto insurance, your life insurance and even your business insurance.    Please feel free to call us toll free, at 877-687-7557 if you have any questions about your personal or your business insurance.  We are here to help you.

NC Steps Up Enforcement On Auto Insurance And Tag Possession

NC state law requires that every licensed vehicle in our state maintain continuous liability insurance in force.  This law has remained unchanged for many years but recently the NC Division of Motor Vehicles has started to change the way that they enforce this law.  And this change has caught many car owners off guard, resulting in nasty fines that were never expected by the car owner. 

The law requiring continuous liability insurance for all licensed vehicles is a good one and is designed to make sure that everyone who drives a car and puts others at risk has some way to pay for the losses that they cause.  In the past there was more flexibility in how this law was enforced, particularly for people who sold a car.  You used to be able to wait a week or so until it was convenient to run down to the tag office to turn in the tag and not risk a fine.  And we all know how this works, you sell a car and you immediately want to take it off your insurance policy and get your refund on the way to your mailbox.  The tag though is usually just a nuisance and you get around to turning it in when it is convenient for you.   That has all changed, and caught more than a few people off guard as the enforcement has been stepped up.  Now, with very few exceptions, if you have a tag in your possession even one day after your insurance has been cancelled, then you will probably have to pay the $50 fine, no questions asked.

There may be many reasons why the DMV has decided to stop going lightly on this rule.  I might speculate that perhaps the increased revenue associated with collection of these fines plays a part.  Or maybe there have been just too many uninsured vehicles out there involved in accidents and causing damages that the drivers can’t pay to fix.  Whatever the impetus behind this change, people who have become used to taking their time about turning in their tags after selling a car, will have to change their patterns or face fines.

After our office reached out to and spoke with a DMV officer, he confirmed that the DMV is more rigorously enforcing this rule and collecting more fines these days.  He also offered some pretty good advice for helping protect yourself from the system itself, even when you do turn your tags in on time.  He asked that we tell people to turn in their tags before they cancel their insurance on a car, and most importantly to ask for a receipt stating that the tag has been turned in.  This is necessary because your tag might otherwise be tossed in a box to be processed later.  This late processing might happen after you have called your auto insurance agent to remove the sold car from your policy.  If so, you would still be facing a $50 fine, even though you did everything correctly. 

At Clinard Insurance Group, we insure thousands of families all across North Carolina.  We hope that none of our clients get caught in this new fine trap.  If you would like any help with your home insurance, your auto insurance, your life insurance or even your business insurance, I hope you will give us a call, toll free, at 877-687-7557.  We look forward to helping you with all of your insurance needs.

HUD Rule Could Step On The Toes Of Homeowners Insurance Companies Meaning Higher Rates For You

Pity the North Carolina homeowners insurance marketplace.  The past year has been pretty rough.  The huge storm losses from 2011 have forced most insurance companies to dramatically raise their rates and limit which homes they are willing to insure.  Trying to buy insurance for your home without the support of your auto policy is rate suicide now.  And even with the auto insurance as support, many homeowners have had to sign the dreaded consent to rate form, giving their insurance companies the right to raise their home insurance rates far above the maximum rate allowed by the state.    And now, the home insurance marketplace faces another ratemaking hurdle – The new HUD rule and the unkown impact that it might have on the insurance industry’s underwriting practices.

This new HUD rule is called the disparate impact rule, and it would expand the Fair Housing Acts discriminatory effects standard and how it applies to actions that have discriminatory effects on minority groups.  Simply state, this new rule would hold companies responsible for policies that result in discriminatory effects on minorities whether or not there was ever any intention to discriminate against them as minorities.  What this could mean, is that home insurance rates might be held to be discriminatory and if so, then this could have enormous impacts on homeowners rates in North Carolina.

When it comes to pricing a homeowners insurance policy for your home, your insurance company will study many different factors that are individual to your specific house and you as the owner.   These factors can be as diverse as the quality of fire protection services are offered in your area to your credit score to your past claims history.   The very nature of insurance rate making is to isolate the high risk home from the lower risk ones in order to price each policy most appropriately.  By their very nature, many of these rate making tools could be seen to have a discriminatory effect on all kinds of different groups of people. All of these factors along with many others that are unique to the house itself as well as the life and attitudes of the home owner go into the process of determining a specific price for insurance for that home and that customer.  But what if the insurance company was unable to use some or all of this information to determine their rates for a home because their methodology could be seen as discriminatory against some particular minority?

  

A rule of this nature could limit the ability of insurance companies to provide more risk specific rates and this could result in an insurance marketplace with two flaws that will force upward pressure on pricing for all insurance buyers.  First of all, if we strip the insurance company’s ability to underwrite a specific location or area for risks that are unique to that location or area, then we will be forcing them to raise the rates on all other homes in order to subsidize those that deserve a  higher rate due to their higher risk factors.  The second flaw in this approach of insuring with more unknowns is that if you limit the information that an underwriter has to evaluate the risk of a home, then the underwriter will have to overestimate the risks, and thus the rate to cover this gap in knowledge about the home or its owner. In the end, this will mean that all homeowners will face higher rates.

At this point in time, we will have to wait for lawsuits to work their way through the system before we know for sure what impact this new rule will have on insurance companies and their home insurance rates.  Some feel that this rule could run afoul of the McCarran-Ferguson Act which gives states the power to regulate insurance.  Perhaps McCarran-Ferguson will protect the insurance companies and allow them to continue to discover the information that they need to create a fair rate for a specific home.   At this point we will have to wait and see what the higher courts rule as challenges to this new HUD rule wind their way through the court systems.

Clinard Insurance Group is an independent insurance agency located in Winston Salem, NC.  We insure thousands of homes all across North Carolina and it is important to us that all buyers of insurance products to be informed consumers.  If you have any questions about your home insurance, your auto insurance or your business insurance, please feel free to call us, toll free, at 877-687-7557.  We will take as much time as you need to help you understand the insurance products that buy.

Medical ID Theft – Some Facts and Figures

While the concept of identity theft is pretty well understood by most of the public, an offshoot of this problem, specifically medical identity theft is much less well understood.  Less than 15% of adults are familiar with the term medical identity theft and of that group, only 1/3 of them could correctly define medical identity.  Still worse, even those that understand the risks are for the most part unable to buy any kind of insurance protection for this risk exposure.   

If medical identity theft is not well understood, it is also grossly underappreciated by the public.  Take a look at a few rather daunting facts and figures relating to medical identity theft.  This crime victimizes some 1.5 million Americans every year.  And the costs of these attacks are now more than $30 billion.  And if this crime strikes you, then understand that the average cost of resolving a medical identity theft issue is $20,000 and the time it takes to do so averages between 4 and 6 months.  And while we are all very protective of our social security numbers, and rightly so, consider for a moment that the street value of a stolen social security number is about $1 while the street value of a stolen medical identity is $50.

There are many different scams designed to steal medical identities but we tend to group medical identity thefts into three broad categories.   

Financial medical identity theft – Someone is getting medical help using another person’s name or other information.

Criminal medical identity theft – A victim may be held responsible for the actions of another person’s criminal behavior.

Government Benefit Fraud – Someone’s medical benefits are being used by another person.

What strategies can you employ to make it less likely that you become a victim of medical identity theft?  Well, most of these are pretty easy steps and what is really required here is that you just take a little bit of time to constantly review and stay in touch with your medical paperwork.  For instance, you should carefully monitor and review all explanation of benefits letters that are sent to you by your health insurance company.  Make sure that each and every benefit listed is accurate and valid.  You can even be more proactive and go ahead and request a listing of benefits from your health insurance company and check this for accuracy.  Also, you can request a copy of current medical files from each health care provider that you use.  Move quickly to promptly correct any errors or false information that you find in any of your medical files.  Keep a close eye on your credit reports in case they show medical debts outstanding.  And you can request an accounting of disclosures from your health insurance company.

While the insurance industry is relatively silent in the area of insurance protection against this risk, there are a few insurance companies that are beginning to offer some options for protection against this type of fraud.  Check with your homeowners insurance agent to see if you can add medical identity theft insurance to your home insurance policy.  While you are at it, you may want to check and see if you can add identity theft to your policy as well.  While the number of insurance companies that provide medical identity theft protection right now is pretty small more and more insurance companies are evaluating this coverage each day and over time it may become much more of a mainstream type protection that you will be able to add to your homeowners insurance policy.

Clinard Insurance Group, located in Winston Salem, NC, currently insures thousands of families all across North Carolina.  We would love to help you with your homeowners insurance, your auto insurance, your life insurance or even your business insurance.  Please feel free to call us, toll free, at 877-687-7557.  We will take as much time as you need to help make sure that you are getting the protection that you want at a price that will pleasantly surprise you.

Homeowners Insurance – Did You Make Any Of These Three Mistakes When You Purchased Yours?

If you purchased a home and got a mortgage with it, then chances are you have had experience buying homeowners insurance.   For the first time home buyer out there, buying homeowners insurance is just one of many distractions in the process that have to be checked off before the loan can close.  That kind of scenario makes a homeowner pretty vulnerable to focusing much more on the cost of the policy rather than the protection it provides.  Now if several years later you find the fire engines are racing toward your home while you stand in the driveway watching it burn, then you may suddenly find yourself wondering what you left off or ignored when you bought your policy.   Here’s a list of some of the most common mistakes that homeowners make when buying home insurance.

The most common mistake that I see is not purchasing enough insurance.  I know;  you are buying a home and in the process you start to feel like you are being nickelled and dimed all the way through.  But your insurance policy is one item where you should focus on protection first and price second.  It’s true that for the majority of homeowners, the insurance policy turns out to be nothing but a promise.  You are purchasing peace of mind and financial stability after a disaster but there is nothing tangible to take home and enjoy after you write the big check to the insurance company.   This is why I don’t blame folks for zeroing in on price as the primary factor in the purchasing decision.  But this is where you really need to take a bit of care and insure your home for full value.  It will be too late to call and ask for an increase as the sirens are wailing through your neighborhood.

 The problem of underinsurance is often exacerbated by the fact that you should be focusing on and insuring for the replacement value of your home.   You will have to build it back after all, and this can often exceed the price you just paid for the home.  For some people that is a difficult concept to understand.    Your agent should help walk you through the process of determining the replacement value of your home so that you can insure it for full value.  This won’t leave you with as much of a queasy feeling as those sirens are getting closer.

Homeowners also often make the mistake of failing to check to see if their home is in a flood zone area.  Flood losses are not covered by your homeowners insurance policy.    Could you easily absorb the costs of repairing flood damage that is equal to 1/3 of your home’s value?   Luckily, if you have a mortgage, then the bank will often catch this and require you to purchase a flood insurance policy.  I’ve also seen several cases where a bank wanted to require a flood insurance policy somewhat unnecessarily when the flood zone only crossed a small portion of a lower corner of the homeowner’s back yard.  If this happens to you, your agent can be very helpful in speaking with the bank to attempt to waive the flood insurance requirement.

The third most common mistake that homeowners make when purchasing their home insurance is failing to insure valuable items separately.     If you own valuable items like jewelry, paintings, musical instruments, guns or silverware, or other collectibles or fragile items, then you should consider adding coverage for these items under a separate endorsement.  Doing so can result in better protection since insurance coverage for these items may be severely limited under your homeowners policy.  If these things are important to you, take a few extra minutes and make your agent aware of them and discuss the best way to protect them.  Some homeowners policies will allow you to add a blanket endorsement for a low limit of coverage for these types of items.  This is a simple, quick and inexpensive way to protect these items if your collections are not extensive.

Clinard Insurance Group is located in Winston Salem, NC, and we insure thousands of homes all across the state.  We will take as much time as you need to listen to your story and to help you fashion a homeowners insurance policy that best suits your needs and your budget.   If you would like help with your homeowners insurance or your  auto insurance, your life insurance or even your business insurance, please call us, toll free, at 877-687-7557.

Here Are The Types Of Workplace Injuries That Cost Employers The Most Money – Is Your Business Vulnerable?

When a worker becomes sick or injured on the job, the ways that this event can impact the bottom line of that business are many and varied.   Of course there are the cost associated with the down time your business may experience while that worker is at home recovering, but there is also the possibility of lost revenue due to lost business that you can’t engage in if you need that employee to get the work done.  And don’t forget that workers compensation insurance policies are experience rated so that means that your past losses will affect the rates that you pay in the future.  OSHA tells us that injuries and illnesses cause increased absenteeism, decreased productivity and reduced morale among the non-injured workers.   All of the effects can be expensive to a small business owner.   But among all of the types of workplace injuries, some in particular are more costly than others.   If your business model leaves you vulnerable to losses of these types, then this is a wakeup call for you to take protective action to prevent  these most expensive types of losses from happening to your company.

There are 5 types of injuries that currently account for 72% of all the direct workers comp costs for employers in the U.S.  These types of accidents  cause losses totaling over $35.7 billion dollars each year.  They are, overexertion, fall to the same level, fall to a lower level, bodily reaction, and struck by an object.  Take just a moment and think about each of these types of accidents, one at a time to determine if your business is vulnerable to that kind of loss anywhere in your work processes.    Once you have done this, think even more carefully about ways in which you could establish changed procedures or different workflow strategies that might help prevent that type of accident.

This is a big job and requires some out of the box thinking to imagine what might go wrong to lead to a loss of any of these types.  The good news is that there is professional help available to you to accomplish this.  Some insurance companies sell only workers compensation insurance policies and often those insurance companies offer a rich and inexpensive buffet of services and programs to help you evaluate and prevent injuries to your employees.  According to the U.S. Department of Labor,   employers can save $4 to $6 for every $1 spent on safety and health programs.  Also, workplaces with successful safety and health management systems are usually able to reduce injury and illness costs by 20% to 40%.  If you consider that overall lost productivity just from lost productivity due to injuries and illnesses in the U.S. costing companies an estimated $60 billion per year, you can readily see that taking a moment to consider loss prevention for your business could have an enormous effect on your bottom line.

I advise that you check in with yourself on these most costly types of injury causes, then check in with your workers compensation insurance company to see what they can offer you to help you prevent them.  If you find that your insurance company is not particularly helpful, or if they don’t have a rich offering of tools and knowledge to help you prevent more injuries, then I suggest you start looking for another workers compensation insurance company.

At Clinard Insurance Group, located in Winston Salem, NC,  we represent a number of workers compensation insurance companies who specialize in this type of coverage only.  They have ways to help you reduce and prevent injuries in the first place, and they also have tools and knowledge to reduce the overall costs of injuries once they occur. If your business is located in North Carolina, South Carolina, Georgia, Tennessee or Virginia, then give us a call, toll free at 877-687-7557 and put us to work for you today to lower your workers compensation costs, both now and in the future.

The Consent To Rate Letter – Additional Confusion For The Consumer

You may have come across one of my previous blog articles decrying the confusion caused by the North Carolina insurance industry’s consent to rate letter.  If you missed them, click here, or here to read a few.   All of these articles though will lead to one very important point for you to remember:  If you receive a consent to rate letter from your insurance company, do not blindly sign and return it.  This is because doing to just gives them carte blanche to charge you insurance rates that are likely to be far higher than you will need to pay for your home or car insurance policy.   This article will focus on just one more feature of this letter that has caused confusion among consumers and left them facing higher rates than they ever expected to have to pay.

I want to start though with a quick background lesson on why North Carolina has a consent to rate form as a part of its insurance system.  Here in North Carolina, the rates for homeowners insurance and auto insurance as well as many other types of insurance policies, are heavily regulated.   Generally speaking, rates are approved or not by the NC Insurance Department as the maximum rates that can be charged for various types of insurance policies.  The insurance companies then file their rates as deviations, or discounts below the maximum rates.  Very few people will pay the maximum allowable rates for their homeowners insurance or their car insurance.  Occassionally though, an insurance company may feel that they would need to charge a specific client more than the maximum allowable rate because that client is perceived to carry a higher risk of loss for the insurance company.  In order to charge rates above the maximum allowed rate, they must have the client’s permission in writing.  And in cases where that client understands that their risk is higher and also has nowhere else to go to obtain insurance, then this is a good arrangement.    Unfortunately the consent to rate letter, once a rare occurrence is now a work around for many insurance companies to get higher rates out of their customers than the Insurance Department would allow.  This has happened in North Carolina in particular because the rates that are allowed have come to seem inadequate by many insurance companies after all of the money they lost to storms in 2011.  Many now use a consent to rate letter on huge swaths of their books of business just to circumvent the rate making process.    This should make it clear that signing a consent to rate letter without checking around for a better rate is almost always going to mean that you will be left paying far more for your insurance policy than you would otherwise have to pay.

Now that we are seeing such widespread use of the consent to rate form in NC, I felt that it was appropriate to let you in on another aspect of this letter that has misled some insurance consumers.   I am talking about the estimated maximum premium that is shown in the letter.  If you receive a consent to rate letter to sign, you will probably see that there is a mention of the estimated rate that you will be expected to pay if you sign the letter.  While this price might appear to be an accurate estimate, often it is far from the total that you will be paying if you sign the letter.  This is because many insurance companies will simply print the new, higher, base rate on the letter.  But the  base rate does not include the additional costs of endorsements to your policy that help to make your policy unique to your needs.  Perhaps you added towing coverage to your auto insurance policy or you have added guaranteed replacement cost coverage for your dwelling to your homeowners insurance policy.  When the consent to rate letter shows a new price for your policy that doesn’t include these other endorsements and the charges that go along with them then you might find that the bill you receive after you sign the letter is quite a bit higher than the estimate shown on the consent to rate form.  This has led to many cases of double sticker shock, once when you read the letter for the first time and yet another shock when you actually receive your updated, consent to rate renewal policy with rates higher than those estimated on the original letter.

The consent to rate letter is a work around procedure caused by the regulations that North Carolina requires for the insurance rating making process.  It can be confusing and downright misleading.  If you receive a consent to rate letter from your insurance company, I would advise that you call your insurance agent right away and try and understand why you are receiving this letter and what other options you may have for your insurance policy.  If you don’t get an answer that suits you, please call us and we will help you find a better solution.

At Clinard Insurance Group, we have many options available to our policyholders as well as to others who are faced with a consent to rate letter decision.  We still have options for writing homeowners insurance in NC without the auto insurance to support it.  Please feel free to call us, toll free, at 877-687-7557 and we will work to help you explore options that don’t include signing over a consent to rate letter to your insurance company.