- 11,997
How are the companies facing more risk?
Can Anyone Comment on This Emerging Risk?
- Thread starter wrxrex
- Start date
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Guest
Guest
pretty simple, they raise rates to raise more money..........not really rocket science
And, when the insurance companies assume more risk, then it is their policyholders that pay the price in the form of increased rates. The taxpayers, the policyholder.. they are basically one and the same. We are the ones that will pay for the fact we keep electing physically irresponsible people to office at all levels of government.
Yes, but carriers know how to assess and manage risk. Municipalities and other govt entities do not.
Carriers will raise rates (as Rouse posted), decrease coverage (or both) or cancel the coverage if the policyholder is doing incredibly stupid things.
To smooth out the risk fluctuation carriers have reserves and reinsurance.
They face more risk because there will total losses than there would be if the emergency responders could get there faster. They will also face having to defend and settle more lawsuits brought against the governmental agencies.
- 11,997
That makes sense.
I very much doubt anyone here has any practical experience working with that. We're talking about something very specialized here.
wrxrex, as I believe I said earlier, you might want to talk to carriers that actually insure this type of risk vs sales/marketing folks (which is what most of this board is).
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Guest
Guest
Here are some thoughts to discuss when you meet these insurance professionals:
[FONT=verdana, helvetica, sans-serif]The scenario as described in the risk and insurance article could affect insurance marketplace for the small and medium sized business owner or building owner. If the reduction in fire and police services contribute to increased insured claims it is forseeable that insurance companies will increase the premium, non renew the policies, make it more difficult to obtain coverage or restrict the coverage. [/FONT]
[FONT=verdana, helvetica, sans-serif]Some cities are proactive in controlling the fire and life safety hazard. For example, cities may have the fire dept. or other dept. perform inspections of buildings to monitor the existence and placement of fire extinguishers, inspect the operation of a building's sprinker system, inspect the operation of a building's alarm system, inspect the operation of a fire suppression system in restaurants, determine whether or not restaurants routinely clean their grease filters and to monitor fire safety drills conducted in larger office and industrial buildings. In times of a budget crisis if these proactive services are reduced or eliminated the fire and life safety hazard increases resulting in higher insurance premiums. [/FONT]
[FONT=verdana, helvetica, sans-serif]A majority of insurance companies, in the marketplace, may change their underwriting requirements to offset the increased fire, life safety and crime hazard. For example, a majority of carriers may require the building to be protected by a sprinkler system or the business owner required to hire a private security watch service. Failing to meet the revised underwriting requirements may result in non renewal. Consequently, the building/business is faced with having to change insurance companies at a increased premium or a new policy with reduced coverage. For example, the new insurance policy for a business owner without a private security company may have a reduced limit of insurance for theft losses. [/FONT]
[FONT=verdana, helvetica, sans-serif]Every state has a dept. that regulates the insurance company's rates. Some states will allow the insurance company to change a rate without requiring the state's approval, some states will allow the insurance company to change a rate pending approval by the state and other states will prohibit a rate change until it is approved by the state. Consequently, the business/building owner's may experience a premium increase in those states allowing the insurance company to change the rate. Or, the business/building owner's may experience policy non renewal in those states that prohibit a rate change without the state's approval.[/FONT]
[FONT=verdana, helvetica, sans-serif]Insurance companies use their own claims data and the services of private rating organizations to arrive at their insurance rates. These private rating organizations compile information on a city's infrastructure, fire and police depts, building codes, building code enforcement, etc. Then, the rating organization is able to take all of this information and quantify it into a numerical rate. Therefore, reduced fire and police dept service impacts the gathered information resulting in a revised numerical rate which will probably be higher. [/FONT]
[FONT=verdana, helvetica, sans-serif]Cities slashing funds not only affects services but may affect their insurance. Cities pay for insurance like the private sector. Some cities have had their insurance cancelled in times of a budget crisis because they do not have funds to pay their insurance premium. Worst case scenario, where a city's liability insurance and/or workers' compensation was cancelled and the police and fire depts had to shut down. From the perspective of the insurance marketplace cities can obtain insurance from commercial insurance companies or alternatives to commercial insurance. The primary reason cities choose alternatives to commercial insurance is the high cost of available commercial insurance. Another reason, is the volatility of commercial insurance marketplace, such as, when the insurance company decides to increase rates or non renew.
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