2009 – A Market Change for Property Insurance

The days of expected low property and casualty rates for insureds is likely to come to an end.  As an agent, you’re on the front lines and this daily reminder is vivid yet the reasons are many.

Pick any news outlet and just hit the headlines to list your culprits for likely rising premiums this year.  The crashing housing market dove-tailed with the sub-prime lending which ushered over-rated collateralized-backed securities into almost every bank’s balance sheet is a big one.  How about Hurricane Ike?  We do know that re-insurers were hit hard by this storm.  Or just plain old disappointing ROI for insurance companies.  By the end of the third quarter last year, the best data available, investment gains totaled less than 50% than in 2007 according to the New York based Insurance Information Institute (III).  The only asset class to weather this last market free-fall is cash.  Yes, even money market accounts saw record redemptions.

But these headlines don’t tell the entire story.  Even with premiums possibly climbing this year, premium revenue is just not there.  Contributing factors to this are falling gross receipts, lay-offs, and businesses just closing their doors.  So what does this mean? It means we are entering a new cycle of premium adjustments.  Insurance Information Institute states, when premiums fall below average as they’ve been for the past few years, insurer’s profits decrease precipitously or disappear altogether, thus they can’t underwrite new business.  When the supply of insurance drops, underwriting appetites narrow and premiums accelerate.

Insureds know there are numerous factors affecting their premiums.  So educate your them on all of the dynamics that are affecting their yearly premiums.  Layout the possible landscape for the coming year and let them know you’ll offer them the best package you can put together.  Premiums may rise but from this is the opportunity of a lifetime to make clients for life!

I want to thank the Dallas Business Journal for information relating to this article.  Peace.  -villageChief

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