What's Up With Insurance in Connecticut
Member since 2019 · 2 posts · 2 votes
What's Up With Insurance in Connecticut
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Meriden, CT · Member since 2018 · 703 posts · 501 votes
1y@Matt Johnson - you are not alone. I've been dropped by Progressive as well. Some insurance companies like progressive also insure auto and other coverages so maybe with the increasing cost of RCV policies, they do not want to be so exposed? I'd love to hear more from the community about why this is happening to places that historically do not have crazy weather events like the Northeast.
7 Replies
- Meriden, CT · Member since 2018 · 703 posts · 501 votes1y
@Matt Johnson - you are not alone. I've been dropped by Progressive as well. Some insurance companies like progressive also insure auto and other coverages so maybe with the increasing cost of RCV policies, they do not want to be so exposed? I'd love to hear more from the community about why this is happening to places that historically do not have crazy weather events like the Northeast.
- Insurance Agent · Member since 2020 · 178 posts · 76 votes1y
There are many contributing factors into why this is happening nationwide, and not just CT.
Carriers catching up to inflation (insurance lags behind inflation), and cost of replacing roofs/cars/houses.... It costs more now to replace/fix a car. Body shops are taking forever to fix them and car rentals are taking longer, which the carrier is paying for is just one example of many. Roofs are double what they used to cost 5-10 years ago.
They say there have also been more severe weather events. This means events that cause over $1B in damages. I am not sure if there are more events, or materials/labor just costs more for them to say it is a severe event. I posed this question to the head of Travelers personal insurance department at their HQ. He couldn't give me an answer on that!
Carriers cannot match what is needed to charge in certain states that limit what they can raise their rates too. This causes them to add restrictions, or just pull out of the market all together. If you are losing billions of dollars and can't match the rate required due to the state insurance department not allowing it, there is no need to continue business.
All coastal states have a possibility to be hit by a major weather event. You might think CT doesn't have any, but being on the coast there is always a change of a hurricane, or other severe weather events.
Many carriers, like Progressive, insure nationwide, and when severe weather events hit an area, it wipes out all premiums they had nationwide. This also causes them to raise rates or just get out all together.
Insurance also needed a reset after they were insuring homes at $700-1,000/year ($300,000+ dwelling coverage) with a $1,000 deductible. Think, how can they cover expenses insuring homes at this amount with a deductible the same as your car!
I know none of this will make anyone feel bad for the carriers, but they are a business and they are just matching what it costs to not lose billions of dollars.
- Meriden, CT · Member since 2018 · 703 posts · 501 votes1y
Quote from @Tony Wilcox:
There are many contributing factors into why this is happening nationwide, and not just CT.
Carriers catching up to inflation (insurance lags behind inflation), and cost of replacing roofs/cars/houses.... It costs more now to replace/fix a car. Body shops are taking forever to fix them and car rentals are taking longer, which the carrier is paying for is just one example of many. Roofs are double what they used to cost 5-10 years ago.
They say there have also been more severe weather events. This means events that cause over $1B in damages. I am not sure if there are more events, or materials/labor just costs more for them to say it is a severe event. I posed this question to the head of Travelers personal insurance department at their HQ. He couldn't give me an answer on that!
Carriers cannot match what is needed to charge in certain states that limit what they can raise their rates too. This causes them to add restrictions, or just pull out of the market all together. If you are losing billions of dollars and can't match the rate required due to the state insurance department not allowing it, there is no need to continue business.
All coastal states have a possibility to be hit by a major weather event. You might think CT doesn't have any, but being on the coast there is always a change of a hurricane, or other severe weather events.
Many carriers, like Progressive, insure nationwide, and when severe weather events hit an area, it wipes out all premiums they had nationwide. This also causes them to raise rates or just get out all together.
Insurance also needed a reset after they were insuring homes at $700-1,000/year ($300,000+ dwelling coverage) with a $1,000 deductible. Think, how can they cover expenses insuring homes at this amount with a deductible the same as your car!
I know none of this will make anyone feel bad for the carriers, but they are a business and they are just matching what it costs to not lose billions of dollars.
I appreciate the insights!
- Rental Property Investor · Running the Earth, watching the sky · Member since 2013 · 68 posts · 18 votes1y
Same. My rentals in the mountains of AZ have had their policies tripled. Thankfully, they state they will do the escrow analysis in Dec, just AFTER my current tenants' leases are up, so I can raise the rent! Otherwise, I'd lose money each month.
My friend who just bought a place across from me, as an STR/family vacay spot, can't even find anyone to insure it, except Tower Hill at $13k/year!!
Now she's looing at insuring it mainly as her vacay cabin, and get a separate liability policy via Proper/Lloyds of London... not even sure she can do that , but we're trying to get creative as it's very necessary. Here is the problem in a nutshell. Once upon a time you paid insurance for outstanding liability like what you owed on your mortgage. So lets say insurance coverage of $300k because thats what your mortgage was on a multi family. Then, insurance companies got smart and started charging for replacement cost and eventually that became the norm. So nowadays replacement costs increase every year and after covid it basically went nuts because of materials and labor. An example: I own a 3 family with a mortgage of $260k, Value $500k, Replacement cost according to insurance company is 1 million. So I now pay insurance on a 1 million dollar multi family. It is absolutely ridiculous and a giant scam. It does not matter who you go to, all the insurance companies are doing it. There is no way my multi family would cost 1 million to build out, land doesn't burn and I'm a GC.
- 1yOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 699 posts · 263 votes
Quote from @Kevin Jo:
Here is the problem in a nutshell. Once upon a time you paid insurance for outstanding liability like what you owed on your mortgage. So lets say insurance coverage of $300k because thats what your mortgage was on a multi family. Then, insurance companies got smart and started charging for replacement cost and eventually that became the norm. So nowadays replacement costs increase every year and after covid it basically went nuts because of materials and labor. An example: I own a 3 family with a mortgage of $260k, Value $500k, Replacement cost according to insurance company is 1 million. So I now pay insurance on a 1 million dollar multi family. It is absolutely ridiculous and a giant scam. It does not matter who you go to, all the insurance companies are doing it. There is no way my multi family would cost 1 million to build out, land doesn't burn and I'm a GC.
It's your mortgage company requiring you to insure to replacement cost - not the insurance company. If you didn't have a mortgage you could insure the property for market value/actual cash value minus the land value most likely.
How many square feet and units is the property you're talking about?
Royal Oath Insurance Group4.9208 Reviews
I have never read in my mortgage contract at closing that the mortgage company requires replacement cost and I have closed 30 deals that the last 10 years. This replacement cost stuff has gotten out of hand and the insurance companies pull numbers out of thin air. I build from scratch and rehab and their numbers are way out of line. On my last full remodel on a destroyed house I kept a record of every cost. Their replacement cost was over my cost by 50 percent. How is that possible???
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