Category Archives: Homeowners Insurance

Hurricane Florence – property losses and insurance implications

Approximately 758,657 homes in North Carolina, South Carolina and Virginia with a reconstruction cost value (RCV) of approximately $170.2 billion are at potential risk of storm surge damage from Hurricane Florence, according to a Corelogic® release.

As we continue to keep a close watch on Hurricane Florence, we’ve put together a list of our content to help understand the insurance implications of storm related property losses.

E-scooter sharing programs: are you covered?

Move over, ridesharing, there’s a new urban mobility player in town: dockless electric scooter (e-scooter) sharing programs are growing in popularity in cities across the U.S. They operate like bike-sharing programs, but they introduce some interesting insurance issues.

scooting into the future
Man riding an electric scooter

The concept is pretty simple: you download an app from companies like Lime and Bird that lets you find and unlock an e-scooter nearby for a small fee, often just $1. You can then, well, scoot off wherever you want to go, paying per mile of riding. These rented devices are “dockless,” so once the trip is completed, you can park your e-scooter anywhere that local ordinances permit – they can’t block public paths, for example.

We’re not talking about mopeds or Vespa-like scooters, which allow drivers to sit, can reach relatively high speeds, and often require a driver’s license. These are battery-powered Razor-like scooters, which require a you to stand, often can’t go faster than 15 or 20 mph, and usually don’t require a driver’s license.

You can cause a lot of damage at 15 mph, though – trust me, I’ve seen a person step in front of a fast-moving road bike. It wasn’t pretty.

So if you cause an accident, are you covered? That’s where things get a bit murky.

First off, in most cities, the company renting you the scooter probably won’t cover your liability – that’s part of the multipage user agreement you endorse by clicking the ‘I Agree’ button. You’re basically riding at your own risk. This may change, though, as scooting sharing spreads. San Francisco’s new permitting process, for example, requires these companies to have “adequate insurance” for each of their users.

As for your own insurance, whether you’re covered depends on the specific terms and conditions of your policies. You should speak to your insurer or agent. When they were created, the typical homeowners and personal auto policies didn’t really consider whether they’d cover a motorized scooter you just picked up off the curb. Expert opinion and wording are critical.

Homeowners: Under a standard homeowners policy (for example, the HO-3), motor vehicles are usually understood to be any self-propelled vehicle and aren’t covered. That is what an auto policy is designed to do. It’s pretty much the same for renters insurance.

Personal Auto: The standard personal auto policy excludes liability coverage for a vehicle with fewer than four wheels. The scooters we’re talking about have two wheels.

Personal Liability Umbrella:  Personal liability umbrella policies (PLUP) offer an extra layer of protection that kicks in when you reach the limit of your underlying homeowners or auto policy. They can also give coverage for things that are excluded from your other insurance policies. For example, unlike an auto policy, a standard PLUP does not usually exclude vehicles with fewer than four wheels.

The bottom line is: check with your insurer or agent about your coverages.

Hail damage to property is averaging $10 billion per year

Hailstorms have grown more destructive in recent years, causing up to $10 billion per year in damage. The reasons range from larger homes being built, to more homes being built in vulnerable places, to the rising costs of roofing materials, according to a recent Washington Post article.

The first North American Workshop on Hail and Hailstorms is happening this week (August 14- 16) in Boulder, Colorado. The group will discuss the rising costs of hail damage, and 200 experts from the fields of meteorology, engineering, economics and insurance are attending. These experts will work together to better detect hail; the microphysics and dynamics of hailstorms; the cost of damage and how to mitigate it; and the likely effects of a changing climate on hailstorms.

The I.I.I. has facts and statistics on hail damage here.

Increase in owner-occupied homes leads to growing insurance exposures

By Steven Weisbart, Chief Economist, Insurance Information Institute

 

For a dozen years – from 2004 through 2016 – the number of owner-occupied homes in the U.S. was virtually unchanged at about 75 million, even though the population grew by more than 30 million during that time span. In the same period, the number of renter-occupied residences spiked – from about 33 million to about 43 million. Both trends persisted through the Great Recession, and on into the recovery, during which time mortgage interest rates plummeted, and many homes went on the market at bargain rates, thanks to foreclosure or short sales.

The implications of these trends for the homeowners and renters insurance exposure bases are easy to see: very little exposure growth in the homeowners market – except for renovation of existing homes and total replacement of older homes with newer ones – and substantial exposure growth (about 30 percent) in the renters market. Premium growth in these lines were affected, since the vast majority of owner-occupied homes are insured, but only 40 percent of renters buy renters insurance.

Based on data released by the Census Bureau on July 26, 2018, we feel confident in saying that these trends have reversed. The number of owner occupied homes as of the second quarter of 2018 is nearly 78 million, and it has increased in every quarter except the third quarter of 2016. The number of renter-occupied homes was 43.9 million in the third quarter of 2016, but dropped to about 43 million by the second quarter of 2018.

As a result – even ignoring the increasing cost of rebuilding damaged homes and content – if the trend holds, homeowners insurers should expect to see a growing exposure base in this line.

 

Solar power and homeowners insurance

On May 9 California became the first state to mandate that all new homes have solar power. The rules go into effect in two years, and are part of the state’s efforts to cut greenhouse gas emissions.

Under the new rules, individual homes must have rooftop solar panels, or a shared solar-power system serving a group of homes. Rooftop panels can either be owned outright and rolled into the home price, or made available for lease. The requirement is expected to add $8,000 to $12,000 to the cost of a home, according to the New York Times. However, savings from heating and cooling could add up to $80 per month.

To help homeowners understand whether solar panels are covered by homeowners insurance, we’ve put together this Q&A.

Q: Are my solar panels covered by homeowners insurance?
A. Yes. Most solar panels are considered a permanent attachment (like a deck) and are therefore protected by a homeowners policy. You will want to call your insurance company and make sure your panels are covered.

Q: How much coverage do I have?
A. Your insurance policy’s coverage limit is the maximum amount that it will pay toward a covered loss. Since solar panels can be expensive, make sure your coverage limit is adequate.

Q. Will having solar panels increase my homeowners insurance premiums?
A: Most likely, yes. Some carriers allow owners with solar energy systems to purchase an optional endorsement to cover the panels. Others include the coverage in the dwelling coverage (Coverage A), if the panels are on the roof of the home, or under “Coverage B,” if they are on the ground or on the roof of a detached structure. Either way, there are replacement costs associated with the panels that would likely increase homeowners premiums.  Homeowners can expect to benefit from solar with increased energy efficiency in the home, but time will tell if the economic advantage of having solar panels outweighs the incremental, upfront costs.

Just like residential sprinkler systems increase water-damage claims, it’s reasonable to expect that solar panels, when attached to roofs, might also increase the chances of roof claims because of damage caused by a windblown panel or a leak at the point of contact, as examples.

Q. What are some of the risks of having solar panels?

A: If a home catches fire, solar panels can be challenging for firefighters. The PV arrays increase the risk of electrocutions, slips and falls and other serious injuries. If the fire is on the roof, the concealed spaces between the panels make it very difficult to get them extinguished. Solar panels are always live, and contact with them with them can cause shock or electrocution. Fire departments are implementing programs to learn how to handle solar panels.

 

Hawaii’s Big Island Volcanic Eruption – What You Need to Know

By Michael Barry, Head of Media and Public Affairs, Insurance Information Institute

 

The number of structures destroyed by the eruption of the Kilauea volcano on Hawaii’s Big Island has climbed up to 35 today since the eruption first started on Thursday, May 3, sending sulfur dioxide into the air, and prompting the evacuation of at least 1,700 residents.

The issues impacting Hawaii’s Big Island:

  • The percentage of impacted property owners carrying either homeowners, business, or earthquake insurance is unknown at this time.
  • Moreover, no one knows how long the eruption will continue; in 1955, the Kilauea volcano erupted for about three months.
  • Lava Zones 1 and 2—deemed the most dangerous of the nine Lava Zones on the Big Island—are where the current crisis is occurring.
  • The U.S. Geological Survey (USGS) makes the Lava Zone designations and the federal governmental agency’s Zone ratings are considered when insurers assess their risks on Hawaii’s Big Island.
  • The Big Island was also the site of a 6.9-magnitude earthquake on Friday, May 4, the strongest quake to hit Hawaii in 40-plus years.  The earthquake was one of hundreds to be felt recently on the Big Island even though none of them caused any notable threat either to life or property.

 The insurance coverages which will come into play:

  • Lava-caused property damage is usually attributed to fire; fire-caused losses are covered under standard homeowners (h/o) and business insurance property policies.
  • Earthquake-caused property damage, or losses tied either to earth movement or land tremors, is covered only if the homeowner or business owner purchased an earthquake insurance policy in addition to a standard h/o or business insurance policy.
  • Few property owners in this part of the Big Island have earthquake insurance coverage.
  • Homeowners forced to evacuate their residences might have coverage through their h/o policy for additional living expenses (ALE) but ALE usually only kicks in when a home has been directly impacted by lava flow.
  • Lava and earthquake-caused (fire, falling objects) property damage to vehicles is generally covered under standard auto insurance policies so as long as the vehicle owner purchased optional comprehensive coverage.
  • More than 3 out of 4 drivers (78 percent) nationwide had comprehensive coverage on their vehicle as of 2015.

The insurers who cover these risks:

  • The top 10 writers of homeowners insurance in Hawaii appear below. (more here)
  • The Hawaii Property Insurance Association, the state’s not-for-profit property insurer of last resort, has since the 1990s sold property insurance to homeowners unable to purchase coverage due to the threat of an volcanic eruption in Lava Zones 1 and 2 on Hawaii’s Big Island.

The state government’s response to the crisis:

  • Governor David Ige (pronounced E-GAY) visited the Big Island on Friday, May 4, and met w/elected officials, first responders, and impacted residents.
  • The governor activated Hawaii’s National Guard to assist Hawaii County with monitoring sulfur dioxide gas emissions, facilitating evacuations, and providing neighborhood security.
  • Hawaii’s insurance regulator has posted a Lava Flow Insurance Information document aimed at consumers.

 

Thanks to Alison Ueoka, president, Hawaii Insurers Council (HIC) and Michael Onofrietti, senior VP, Island Insurance, and the HIC’s board president, for their help in developing this post.

The Kilauea volcano eruption – a primer on insurance coverage

Over two dozen homes have been destroyed so far when the Kilauea volcano on the island of Hawaii began erupting last week. Lava flowed into residential neighborhoods on the eastern side, as this Wall Street Journal video shows, and the island  has been shaken by hundreds of earthquakes, the largest one with a magnitude of 6.9 occurred on Friday.

The I.I.I. has a primer on volcanic eruption insurance coverage. Below are some highlights:

What’s covered

  • Most home, renters and business insurance policies provide coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.
  • Homeowners and business owners’ policies also provide coverage for property damage, vandalism or theft due to looting if the occupants are displaced.
  • There is typically a 72-hour waiting period before business interruption coverage kicks in.
  • Damage to vehicles caused by lava flow is covered under your auto insurance policy if you have comprehensive coverage, which is optional. Direct, sudden damage to engines from volcanic ash or dust is also covered under most policies.

What isn’t covered

  • Most home, renters and business insurance policies do not cover damage from earthquake, land tremors, landslide, mudflow or other earth movement regardless of whether the quake is caused by or causes a volcanic eruption. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy.
  • Damage to land, trees, shrubs, lawns, property in the open or open sheds (or the contents of those sheds) is typically not covered.
  • The cost to remove ash from personal property is generally not covered unless the ash first causes direct physical loss to personal property. There is also no coverage to remove ash from the surrounding land.
  • Damage that occurs to homes, businesses or vehicles over time due to volcanic dust is not covered under most policies.
  • Volcanic Effusion (i.e. volcanic water and mud) is not covered under a typical homeowners, renters or business insurance policy. However, it is covered by flood insurance, available through the National Flood Insurance Program.

 

 

Dog Bite Liability Claims by State – Interactive Map

Dogs provide millions of people with companionship, happiness and health benefits. But even dogs that are normally docile may bite when they are frightened or when defending their puppies, owners or food.

To educate pet owners about how to prevent dog bites The American Veterinary Medical Association (AVMA), the United States Postal Service (USPS) and State Farm Insurance are joining together for National Dog Bite Prevention Week (April 8 -14).

Dog bites and other dog-related injuries accounted for more than one third of all homeowners liability claim dollars paid out in 2017, costing almost $700 million, according to the Insurance Information Institute (I.I.I.) and State Farm®, the largest writer of homeowners insurance in the United States.

California had the largest number of claims in 2017 followed by Florida. Florida also had the highest average cost per claim at $44,700.

For more details see our interactive map below.

 

Assignment-of-benefits haunts Florida’s homeowners insurers

Third party abuse of assignment-of-benefits is having a negative impact on Florida’s homeowners insurers’ 2017 financial results, according to a recent S&P Global article.

An assignment of benefits occurs when a person with an insurance claim allows a third party to be paid directly by the insurance company. Usually this happens after a claim, when the insured assigns their benefits right to a contractor or whoever is making the repair the claim is meant to cover. A loophole in the Florida law invites abuse of the right and the ensuing litigation drives up costs.

S&P Global’s article showed how the loophole has dramatically increased costs at Florida’s Citizens Property Insurance Corp.

Hurricane Irma by itself made 2017 a challenging one for Florida’s Citizens: over $1 billion in net losses and loss adjustment expenses.

But increased litigation expenses (which show up in insurance statements as direct defense and cost containment expenses incurred (DCCE) – often referred to as allocated loss adjustment expenses) – those hurt a lot too. The ratio of homeowners DCCE incurred to direct premiums earned increased to 16.9% from 15.2% in 2016, the average such ratio for the first 13 years of Citizens’ existence was 2.9%. In other words, litigation costs are almost six times worse than they were just a couple of years ago.

Private insurers in Florida are also reporting the negative impact of litigated assignment-of-benefits claims.  Universal Insurance Holdings, Florida’s largest private property insurer, reported that about 12% of its claims from Irma had some aspect of assignment of benefits to them.

So far, legislative reform of assignment-of-benefits abuse remains in limbo.

Effective communication, not speed matters most in P/C insurance customer satisfaction, new J.D. Power survey finds

According to a February 22 news release by J.D. Power & Associates, claims experience satisfaction among homeowners filing property insurance claims has reached an all-time high, despite record-high property losses following a spate of hurricanes, earthquakes and fires in North America.

The J.D. Power 2018 U.S. Property Claims Satisfaction Study found that insurers that have achieved the highest levels of customer satisfaction have also been the most effective at managing customer expectations for the time it will take to settle claims.

“The last two years of record catastrophic losses have put P&C insurers to the test, and many have risen to the occasion, driving overall customer satisfaction levels to new highs,” said David Pieffer, Property & Casualty Insurance Practice Lead at J.D. Power. “While that overall performance is a positive for the industry, there is wide variability in the ranges of performance among insurers in different regions of the country and between different service attributes. Particularly noteworthy, customer satisfaction in Texas and Florida—two of the areas hardest hit by hurricanes—show below-average results, spotlighting areas where there is still room for improvement among insurers.”

The time it took to settle a claim is the single lowest-rated attribute in the study, with 1 in 7 respondents indicating that the claim took longer than expected. However, when time frames are properly managed, even groups that experience the longest time-to-settlement still rate their experience above the industry average of 8.45 (on a 10-point scale). Time-to-settle satisfaction ratings are 1.9 points lower when insurers miss customer timing expectations, even when the time frame is relatively short.

Click here for the full J.D. Power release and rankings.