Insurance Carriers and Premium Rates?

Question

With the increasing cost of insurance permiums across the board (not just medical) are the carriers ultimately going to put themselves out of business?

I hear of it everyday (I work in the insurance industry); business owners cannot compete because their liability insurance has gone up so they close shop, homeowners cannot afford their homeowners insurance because their premium has gone up (especially those on a fixed income), public events have been cancelled because their general liability premium has gone up too. These are just a few examples.

When all these policies are being cancelled due to cost issues the carriers aren't earning the premiums; sooner or later something has to give. What will that be and when?

Answer 1

I don't believe the carriers will collapse.  They might need to reduce their costs, at some point the price will simply outpace the supply and demand curve al together, but the reality is that people will always need the insurance.

Health and Homeowners' (or Renters') Insurance are always needed for the individual, and Liability Insurance will be needed for events of any size or substance.  Especially as lawsuit-happy as American culture tends to be.

Health and dwelling-based insurance are the must haves, because accidents DO happen and the price to fix both body and home is simply prohibitively high without the stop-loss of the insurance.  I doubt those companies will ever price themselves out of the market.

Liability and general liability... well, if the event or business can't keep up with the meager increases those industries have been seeing of late, then there is a pretty good chance that they weren't doing well, financially speaking, in the first place, and the insurance is just an excuse.

Something's got to give?  Maybe.  But if it is, I very much doubt it will be the insurance companies.  It's more likely to be the value of the dollar, at the rate we're going right now...

Answer 2

Actually, the opposite is true. We are in a middle of "soft market". It means insurance carriers have so much money that they write risks that they wouldn't previously consider. Workers Comp rates have gone down twice in 2007!!! Premiums are really low (Hartford's monoline GL is $350)

Answer 3

I think it depends on where you are writing. I write in CO, and rates are going down. Overall, as a nation, I can understand your point.

As for Property insurance skyrocketing, I believe you can point it on hurricane katrina. More specifically, the legal suits that were brought up and won against the insurance companies after the hurricane. Prior to those suits, the industry felt fairly comfortable with their ability to deny claims based on flood damage. (Flood is considered a separate policy) This kept the premiums reasonable in coastal areas. After Katrina, cases involving homes that were blatantly damaged by flood, were being brought up and won against the insurance companies in the courts of Louisiana and Mississippi. The insurance industry panicked and began to sky rocket rates in hurricane prone areas, expecting to get bombarded with legal suits if a hurricane were to strike agian. Now in states like Florida, the governor stepped in and tried to freeze premiums. The companies have responded by refusing to write new business and non-renewing current customers. They would rather leave the state completely than accept the risk of another legal storm.

What's the answer? Something will give. Either more risky insurance companies will come in and hope they can fund a catastrophe, the states will finally accept that rates in coastal areas will be outrageous or the option I hope will come true, the courts will tighten up on these non-qualified legal suits against the insurance industry.

Good question, star for you!