While we like to think about Florida in terms of vacations, sunshine and relaxation,
the past few months for Florida have been anything but. Hurricane Ian struck Florida's Gulf side at the end of September. While many of our Ohio/Indiana neighbors realized the immediate impact on their properties or families in Florida, Ian will continue to impact the insurance market for the months and maybe years to come. Clients across the nation can expect that Ian may impact their future rates. You may be asking yourself why...
Progressive Insurance reported in the middle of October that they anticipated $1.4 BILLION of claims due to Hurrican Ian. Luckily for Progressive, insurance carriers also buy insurance to protect their risks, called reinsurance. Therefore Progressive may write checks in the amount of $1.4Billion, but will recoup a portion of the cost from a reinsurance company.
Progressive is a national company. Insurance is based on a principal of spreading out risk across a large diverse population. The companies collect premiums from insureds with the goal of having enough premiums to offset the cost of claims. The difficulty with a catastrophe like Hurricane Ian is that if the insurance company spreads the $1.4 Billion of losses over their policyholders only in Florida, insurance in Florida may become extinct. Progressive is more likely to spread out the $1.4 Billion of claims over their entire policyholder base. Each policy will be effective, but less so than just spreading across the Florida policyholders.
But what about our clients who have insurance with a small mutual company that doesn't write with Florida. Why would they be impacted? Almost all insurance companies purchase reinsurance from another company. Remember how Progressive isn't going to foot the bill for the entire $1.4 Billion? Unfortunately premiums for reinsurance have been increasing drastically for our insurers (not only because of Ian, but also as claim prices in general rise). Our carriers are incurring more reinsurance expense, or higher reinsurance deductibles, and therefore need more premium from insureds to remain profitable.
What can insureds do? Unfortunately, there is not much any of us can to prevent weather events. However, we can apply this same principal to other claims, such as car accidents, high speed claims, etc. The more we can promote safe driving habits across the nation, the better. The less claims, the less the insurance companies payout and therefore, the less premium they have to charge to remain profitable.