I have discovered another reason your rates are going up. It is human error, and greed. We had a hail storm come through here on Sept. 5, 2013. I know that date very well because my agency alone probably replaced 25 roofs (or is it rooves?).
It was a mess. Storm chasing roofers came into town, telling people they needed a new roof even if they didn’t. The process is, when you have damage done to your house due to a hailstorm, you need to get someone out there, ideally a local roofer, to take a look and see if there is damage CAUSED BY THE STORM.
That type of damage is absolutely covered on your homeowners policy. I am familiar with a story of an insured who said everyone on his block is getting a new roof so he should get one. He was asked if there was damage and he didn’t know. He went through the claims process and it was determined that his roof was not damaged by the storm. His insurance company even sent out a structural engineer to look at it and it was fine.
Didn’t matter. He wanted his new roof. He was so upset that all of his neighbors we’re getting a new roof and he wasn’t. He was even threatening to sue the company. It was unbelievable.
The same week, a client came into my Wife’s business and told her that she had just gotten a new roof even though there was no damage on their old one.
That is not the way insurance is supposed to work and at the end of the day, it is a factor that increases your insurance rates. The insurance company doesn’t owe you anything. It’s not a savings account that you can dip into whenever you want. It is there for you for certain circumstances. It is no different than if your car was parked in a parking lot, and every car but yours was stolen out of the lot. Everyone else got their car replaced, shouldn’t you?!
Your insurance contract does not state, that you get a new roof, if your neighbor gets one. It will replace your roof under certain circumstances.
Let’s do some math. If a roof costs the insurance company $12000 per roof, and they replace 25 of them, that equals $300,000. The average homeowners policy in my book of business is about $650 per year. That means we need to insure 461 homes to cover the cost of that one storm. That is just out of my agency. If the insurance company is agreeing to replace roofs that aren’t even damaged, they have to dig into the coffers and pay out more money.
The insurance companies have to keep enough money in the bank, called reserves. If the reserves drop below a certain amount, they have to be replenished. The most common way to do that, is to do a statewide rate increase. Remember, insurance is “shared risk”.
This was an experience that was eye opening to me and I felt I needed to share.
