By Nick Strain, CFP®, CPWA®, AIF®, Senior Wealth Advisor
P&C Insurance Shellshock: What to Do About Cancellations and Rising Premiums
We have seen the biggest changes in the property & casualty (P&C) insurance in decades. P&C is the insurance coverage provided through your personal home, auto, and umbrella policies. There is also a business and commercial insurance version of P&C that covers property loss and third-party liabilities.
Both homeowners and businesses are facing significant insurance rate increases; as well, coverages are being cancelled as different parts of the U.S. have experienced devastating fires, hurricanes and floods and significant claims are hitting insurance companies.
Why P&C Insurance Premiums Are Increasing
On average, homeowners insurance has increased 17.4% nationally in the first half of 2024, compared with 11.6% in 2023 and 5.9% in 2022. We have seen significant increases in California – and more increases are coming. The California Department of Insurance has recently approved a 34.1% increase for 350,000 homeowner policies with Allstate. State Farm is the largest home insurer in California and has requested that California allow a 30% rate increase for homeowners and a 52% increase for renters. Every state insurance department is grappling with how much to allow insurance companies to increase personal home insurance rates next year.
We have heard from clients as they have received insurance premium increase and cancellation of insurance policy letters: What can they do?
What to Do If Your Insurance Premiums Go Up
Working with a knowledgeable broker is key.
Whether you have received a significant increase in your premiums, had one of your coverages dropped, seen full cancellation of your insurance, or even no increase at all (for now), it’s important to work with an insurance broker to understand your options. Your broker can review your current insurance coverages, and shop your home, auto, and umbrella policies across multiple insurance companies. A capable broker can assist in identifying an insurance carrier that specializes in your situation and may offer the best coverage for your property at the best market rates.
I’ve outlined three scenarios and action items for each scenario below.
1. No significant premium increases
If your home, auto, and umbrella insurance has not significantly increased, we would still recommend that you reach out to your insurance agent to review your policy coverages. Home values have increased over the last few years and replacement costs have also increased, so it’s important to make sure your coverages have kept pace. Talking through your current circumstances with your agent or broker is a proactive step to help make sure you and your family are well protected. Take this opportunity to also ask if your current premiums are competitive in the market.
2. Large premium increases: Time to comparison shop
If you receive a significant increase, you may consider reaching out to an insurance broker who can assist you in comparing your home, car, umbrella and any other insurance policies with multiple insurance companies. Some insurance companies have stopped accepting any new policies in some states, including California – but some companies are still accepting new customers. It’s important for the broker to know your property location; they can advise you on which insurance companies are accepting new customers in that area and seek out competitive rates for you.
Additionally, this is a good time to review your insurance coverages for your home, auto, umbrella and other coverages to confirm that they are at sufficient levels. You may be underinsured in some areas, for example. You may also consider increasing your deductibles to lower your premiums. For example, you could save money by increasing your homeowners deductible from $1,000 to $5,000 or more.
3. Policy cancellations: If your insurance is canceled, can you get it back?
We’ve had clients receive cancellation of insurance policy letters in the mail; sometimes they’re given only one-to-six months to find new insurance. If this happens to you, it’s critical to reach out to your current insurance agent to inquire why you’re being cancelled.
We have seen a few recent situations where brokers and agents have been able to get our clients’ insurance restored. Sometimes called reinstatement insurance, this occurs when the cancelled party is able to provide evidence that the cause of concern for the cancellation has already been fixed or could be fixed easily to satisfy the insurance company and restore insurance.
If the issue can’t be resolved, you’ll need to work with an insurance broker who can make inquiries across alternative insurance companies to find which would be willing to insure your property and insurance needs, drilling down into the coverage that would be provided along with premium costs. With the broker’s help, you can compare each of the quotes to determine the best solution for you and your family.
The Importance of Working with an Insurance Broker
We have also seen many homes in fire-prone forested areas that no insurance company will insure. In this case, an insurance broker can also provide instructions on how to sign up for a state FAIR (Fair Access to Insurance Requirements) plan. In California this is called the “The California FAIR plan” – state-mandated insurance of last resort. Other states, including Florida, Hawaii, New York, and North Carolina, have their own FAIR plan. You can find more information here:
https://content.naic.org/cipr-topics/fair-access-insurance-requirements-fair-plans
Reviewing Your Insurance Periodically for Optimal Coverage
To summarize, in this insurance environment, it’s important to work more closely with your insurance agent or broker to keep your policies up to date. Virtually nothing remains static with insurance; you should be reviewing your coverages from a personal net worth standpoint, coverage amounts, and your property replacement costs periodically. If your premiums have significantly increased or your policies have been cancelled, it can be helpful to work with an insurance broker who can get quotes from multiple insurance companies to help get the best coverage at competitive pricing.
Sometimes an insurance agent may have to reach out to 10-15 companies to get quotes depending on where you live and the type of policies you need to protect your family’s assets from a potential devastating event like we’ve seen recently with fires, flooding, and hurricanes.
Please reach out to your current insurance agent or your Halbert Hargrove team to discuss your insurance policies. We can make an introduction to an insurance broker to evaluate your current insurance needs and help make sure your assets are properly insured.
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
