President's Message

No Relief in Sight?

By Alan Long, Vice President

A recent report from one of our insurance companies cited 16 catastrophic weather-related events occurring in the first nine months of 2011 versus 2-3 on average. In a year that’s been rife with catastrophic events, including tornadoes and severe thunderstorms (the most active season in more than 50 years), and more recently, an active hurricane season including a near miss from Hurricane Irene on Cape Cod, homeowner’s insurance premiums may be headed higher. According to a recent article in Kiplinger’s magazine (September 2011), insurers may try to increase rates by as much as 20 percent in areas hit hardest by these events.

The good news is that Hurricane Irene was downgraded to a tropical storm before reaching Massachusetts and Cape Cod was spared from major damage, other than the inconvenience created by significant power outages across the region. The bad news is that Irene created havoc from North Carolina to Vermont causing significant damage to inland areas. Fortunately, because the “areas hit hardest” did not include the Cape & Islands, we may be spared from any significant premium increases at this time.

Even though Cape Cod dodged the worst of the storm, the insurance industry remains convinced it is only a matter of time before we take a direct hit from a major hurricane.
Unfortunately, within the past eight months two of our largest business clients had their property insurance policies “non-renewed.” Their insurance companies cited concerns over forecasts calling for a hurricane season that would be more active than usual. So the market for insurance remains very difficult locally with fewer companies willing to take the risk of insuring in coastal areas.

And don’t look for a break because market values of homes and businesses have fallen. Your policy limits and premiums are tied to the cost to rebuild your home not to its current market value. Again, according to Kiplinger’s report, “as of late spring, the overall producer price index for construction materials was up 7.5 percent for the previous 12 months.” Lowering your insurance limits may result in your home being under-insured leading to a potential penalty in your loss settlement in the event of a claim. So even in view of these difficult economic times there appears to be no relief in sight for homeowner’s insurance rates.

• Read all INSURANCE CURRENTS, Fall 2011