Rising Minimum H/O Deductables?

[togatown]

We tell them "you insure a $ 5000 automobile with a $ 500 deductible, so let's see, that translates to $ 25,000 deductible on your $ 250,000 home, but since that doesn't make sense, a $ 1,000 or $ 2,000 should, right?"
Customers have got to be educated away from low deductibles and using the policy for maintenance, since it is going to cost them a CFD and higher premiums, or unnecessary cancellation.

 

[Bonn354]

Thats nuts................

We have some companies in Florida that have a minimum deductible of $2500.

 

[joshb]

Thats nuts................

Not as nuts as our loss ratios would be without it.

 

[smoothieking]

Larger deductibles will lower your loss ratio and the amount of claims. Low loss ratios lead to contingency bonuses.

Yes, this. H/O coverage amounts have always been a quagmire, it's no wonder that insurance companies would take the opportunity to improve their bonuses.

 

[Texasproducer]

1% of coverage A here in Texas. That's the standard. Some places even going to a 2% for the wind/hail deductible.

 

[GMANPRO]

I understand the theory and I don't sell low homeowner deductibles, but at the same time, why not sell a $500 ded?

Does a $2000 fence claim really destroy a carriers loss ratios? No, not a prayer. Especially since a lot of individuals won't file the claim anyway.

On a $100K loss, does the difference between a $500 ded and a $1K or $2K deductible really have much impact on the carrier? No, not really.

My point is, why not offer it, even if at a much higher premium. Some people want it. Good for them.

Dan

I have to go with Dan on this one. If they really are that concerned about it, offer it, but at a much higher premium.

I don't think it makes that much of a dfference to the company, but it pisses off customers and prospects.

 

[NCAgent]

I agree to a certain extent. I think that the 500 to 1k is dumb. I think if you are going to raise a minimum deductible go to 1% from $500 or $500 to $2500. 500 bucks more isn't going to be mean anything to anyone but a pissed off client. At least 2k difference in claims will add up over time and perhaps reduce the time taken up by adjusters. Heck, do a scaling deductible like some companies do where the higher RC gets a higher deductible (though not proportional like a percentage.)

We all want the adjusters at the same time to handle a claim. Storms here, water backup there, theft, fire, etc. But then we get mad when they take time to call us back because they have other claims to do that are 800 bucks on a doctor's house who clearly can afford that new water heater. I think that is what insurance companies are trying to do- reduce money paid out on claims through a higher deductible (literal reduction in claim amount paid) and administrative costs for the adjuster, paperwork, and etc.

 

[Jason Janus]

That $500 and $1000 has been the standard in the MI, OH, IL region for years and no one likes change. Great points on the auto deductible comparison. Everyone likes options, so give it to them but price it out of the market.

 

[PC_Agent_in_NC]

Allstate in SC has gone to minimum $1000 other, 1% wind/hail. I think it's part of the "House and Home" program. In NC we can still do $500.

 

[insguy]

I have to go with Dan on this one. If they really are that concerned about it, offer it, but at a much higher premium.

I don't think it makes that much of a dfference to the company, but it pisses off customers and prospects.

As someone who used to work for a major carrier and dealt in debates about increasing the minimum deductibles, I can shed some light on the reasoning...

Where I worked, all deductibles were priced to the same long term loss ratio, but higher deductibles bring greater stability to year to year results because any single storm (or series of storms) has less claim potential. Of course, the flip side is less premium so "good weather" years aren't as good from a profitability standpoint.

Short answer...higher deductibles equals greater profit stability.