The phenomenon called the “Non-renewal.”

It’s really not a phenomenon at all. While this may seem dramatic, it is not at all uncommon. Learn how and why insurance companies protect their bottom line and what you can do about it.

LAST WEEK a non-insurance industry friend sent me this article about State Farm’s decision to stop issuing new home-owner’s insurance policies in California. While this may seem like an extreme step, it is not actually that surprising. 

State Farm is the largest property-insurance company in the United States. This past year it suffered a $13.2 billion underwriting loss - the largest in its 100 year history. Because of this, it has had to re-evaluate the profitability of the markets in which it chooses to operate. Even in the setting of these losses, deciding to leave a market as large as California’s may seem unwarranted to the casual observer. However, this was most likely a carefully considered decision.

Insurance companies generally try to avoid charging large premiums in order to attract a large customer base and appropriately pool risk. Until now State Farm has been extremely good at this, offering insurance at a substantial discount. However, recently they have been faced with both an unpredictable weather climate and new post-Covid marketplace conditions which have rapidly altered the risk environment in which they operate. Unfortunately, even with pooling of risk across a large number of customers in California, they faced risks that were too high for the premiums they were able to charge, threatening their profitability.

Sometimes struggling insurance companies will take less drastic steps in order to navigate a changing risk environment. Oftentimes this involves taking some “creative” measures to avoid taking on certain risks or paying out for certain claims -result in unpleasant experiences for some customers. What are some red flags or indicators that an insurance company like State Farm is struggling in a market?

They make changes to your insurance policy.

Here are what those changes may look like:

 ➡️ They increase your premiums.

➡️ They add new deductibles  

➡️ Your deductibles increase

➡️ They order an updated home inspection to confirm replacement values.

➡️ “Non-renew” risks are added to your policy

➡️ New restrictions or limitations on coverage.

➡️ Remove coverage.

➡️ They stop writing new business.

➡️ Or they exit a particular space or geographic territory all together.

Bottom line: You can’t set it and forget it. Your insurance that is.

Your insurance carrier will change its position every year depending on its overall risk tolerance, profitability, and current market conditions. They need to do this in order to remain solvent. The way in which each insurance carrier chooses to communicate these changes to its customers varies. This is where an independent insurance agent can be your secret weapon and your advocate. Industry veterans have been closely watching the frequent weather catastrophes changing market conditions in states such as California, Texas and Florida for years. While these states may seem far away, events there have a more local impact in the types of policies and rates that an insurer may offer to you. A good agent aware of current events and marked trends. I therefore encourage everyone to review their current insurance coverage. If you haven’t done this recently, now would be a good time. The current insurance market is highly dynamic and staying ahead of these changes can save you time, money and a great deal of frustration.

To my industry friends: What are some insurance trends you’ve seen to mitigate risks?

To my non-industry friends:  What do you have questions about? ⤵️

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NaVella was created out of equal parts love and frustration with the insurance industry, its complexities, and the ever-evolving market space.  We are on a mission to overdeliver and work with the most exclusive high-value insurance carriers in the world.

With more than 16 years of experience in multiple facets of this industry, 1000+ insurance policies analyzed and reviewed, and hundreds of customized insurance portfolios crafted, we are dedicated to giving you control over what and how you protect what you care about most. We are a woman-owned, progressive, independent insurance agency and consulting firm. We offer personal lines insurance solutions. Our product solutions include insurance for your: Home(s), auto(s), collection(s), Excess + Umbrella, boat, and term life. Our consulting and coaching services serve both personal and corporate clients. Headquartered in Massachusetts, and primarily focused on the Massachusetts and greater New England markets, we can write nationally.

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