Home Page Group Health Individual Health Business Insurance Home and Auto Insurance


Blog by:  Ken Mogren, CPCU

Experts who have tried to put a cost estimate on the recent storm have been quick to point out their guesses may be conservative. It might be a couple of years before we know  the final tally, but it could very well end up being the biggest catastrophic event  the insurance industry has ever had to deal with.

Losses are not likely to overwhelm the industry, but the storm is sure to make 2012 a very bad year for many insurers.  It’s almost certain to lead to future rate increases. While insurance companies try to set rates in proportion to the degree of risk in various geographic regions, some of the pain inevitably gets shared by policyholders who watched from afar.

This is especially true for flood insurance.  Most flood insurance is written through a country-wide Federal Government program. Even though the program liberally subsidizes premium dollars with tax dollars, it has operated in the red ever since Katrina hit New Orleans in 2006. Policyholders far from Louisiana have faced rising rates and Sandy is sure to have the same affect. Regardless where they live, people who carry flood insurance should expect their rates to rise.

We expect reinsurance companies to get hit very hard by Sandy.  Reinsurance is coverage purchased by insurance companies to limit their losses when catastrophes occur.  Nearly  all insurers  buy at least some reinsurance and when reinsurance rates go up, as we expect they will,  those increases  seem  to ultimately  get  passed on to  all insurance consumers.

Insurance is an effective mechanism for spreading the cost of society’s losses over all insurance purchasers. You aren’t apt to see Sandy as a line item on future home and auto insurance bills, but if those bills are higher, Sandy will likely be at least a small factor in the increase.  If there is any consolation, the impact on rates in Minnesota and Wisconsin will be minimal compared to New York and New Jersey.
Posted 1:39 PM  View Comments

Tags: insurance
Share |


No Comments


Post a Comment
Name
Required
E-Mail
Required (Not Displayed)
Comment
Required


All comments are moderated and stripped of HTML.
Submission Validation
Required
CAPTCHA
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive


View Mobile Version
HomeClaimsGet A QuoteContact Facebook Twitter LinkedIn Youtube Powered by Insurance Website Builder
174 Center Street | Winona, MN 55987
O: 507-452-3366 | TF: 800-657-4448
975 34th Avenue, Northwest Suite 302 | Rochester, MN 55901
O: 507-424-4400 | TF: 800-657-4448