Page 11 - JULY2023 NFLL

July 2023 NEWFOUNDLAKELIFE.COM Page 11
By Jim King neWfounD insuRance
If you just received your bill for the renewal of your homeowner’s insurance policy or your automo- bile policy, the words above will sound familiar.
All insurance companies have been increasing premiums by as much as 10%-20% upon the re- newal of the current policy. As your agent, we wish we could change this but we can’t. The best we can do is explain what is happening and try to help you find options.
The dramatic increase in in- surance premiums is being driven by three factors. Two are closely related as I’ll explain. The third is something that is a little more “behind the curtain”.
The two closely related factors are being driven by the larger econ- omy. When Insurance Companies renew a policy, they look into the future and try to predict what costs will be in the event they need to pay a claim in the 10th, 11th or 12th month of the policy. Due to the increasing cost of building ma- terials and construction labor (as explained in last month’s column) insurance companies are increas- ing premiums to reflect those pro- jected costs. In addition, and above the projected construction costs, Insurance Companies are also ap- plying and “inflation guard” factor to the renewal premiums to cover anticipated ancillary cost.
The less obvious” behind the curtain” cost drivers relate to the cost of “Reinsurance”. “Rein- surance” is when insurance com- panies, let’s call them “primary” insurance companies, buy insur- ance policies to protect themselves. As an example, if a primary In- surance Company has a portfolio of $500,000,000 in policies, they don’t want to assume total respon- sibility for all of that risk. So, they buy insurance from what we can call a “secondary” insurance com-
pany like Lloyd’s of London. The primary insurance company fac- tors in the cost of “Reinsurance” into their overall cost of doing business and that cost is passed along to the customer.
Due to major losses in 2022, particularly in Florida and re-
lated to Hurricane Ian, the Rein- surance or secondary insurance companies were required to pay out billions of dollars to cover claims. They now are applying unprecedented increases to the cost of the Reinsurance for 2023 and 2024. We have heard of in-
creases for the cost of Reinsur- ance of the much as 85% above last year.
While we as your agent can’t control how the insurance com- panies operate or the cost of your premium, we can help by shop- ping around on your behalf to get
you the best coverage at the lowest possible cost.
Please feel free to call us with any questions or concerns about your insurance coverage. We are happy to help. For our website, please see our add on the front page.
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My Insurance Policy Just Renewed and the Premium is Outrageous!
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