Alliant's leaders discuss the unprecedented insurance market
The insurance market is going through significant changes, many of which we have mentioned before: more difficulty in securing insurance, higher premiums nationwide, even non-renewals. But the situation continues to evolve, and there are early signs that the market will stabilize. To give you a clearer idea of where things stand and what the future may hold, two members of our leadership team share their thoughts.
Is the current market as tough as everyone says?
Cindy Zobian, EVP, Managing Director: Simply put, we have never seen market conditions like these before. In essence, it’s a capacity issue: the rate of natural disasters—and the damage caused by them—have increased exponentially while home values and rebuilding costs have gone sky high.
Mark Recht, SVP: Case in point: we just got another announcement from a carrier about adjustments caused by inflation. Unfortunately, higher premiums and insurance challenges aren’t just happening to property owners in areas prone to most natural disasters, such as California and Florida. Those are countrywide phenomena. There is currently a cloud casted over the market.
CZ: That said, we can see glimmers of light at the end of the tunnel!
Well, that’s hopeful. What makes you optimistic about the future?
MR: We saw a similar market a while back in Florida after Hurricane Andrew, but within a few years, things had shifted for the better. Homeowners learned to incorporate new and better risk-mitigation methods, the government placed stricter building codes, technology helped us to map the riskiest areas, and we incorporated more flexibility into insurance programs. Together, that all worked to stabilize the situation.
As for the current moment, Cindy and I just met with reinsurers [Note: As a reminder, reinsurers assume a portion of carriers’ risks] and they told us they are in the process of figuring out how to add more capacity. If they can take on more risk, carriers will be able to as well.
CZ: We have seen many insurance trends over the years, but, ultimately, they come down to finding a middle ground in the marketplace. That’s what the industry is striving for again today. I’m not saying the problems will be solved in a year, but our decades in the business have us hopeful that things will get easier eventually. At the same time, I don’t think insurance is going to be a buyer’s market again.
What is Alliant Private Client doing to help policyholders in this market?
CZ: We are being proactive. We don’t wait to get non-renewal notices or other surprises. Our team is constantly on the lookout for unexpected solutions to lost coverage.
MR: For instance, clients are becoming more comfortable with unregulated solutions, so that has allowed us to be more creative in our use of non-admitted options. And without being arrogant, the fact that we are one of the largest brokers in the country gives us significant clout among carriers who have begun to prioritize trading partners. We are also working more with different organizations, and sometimes even direct writers, to be able to offer solutions that make things easier for our clients.
And what can clients do to make things easier on themselves?
MR: First and foremost, they need to recognize that it really is no longer a buyer’s market. These days, the priority is finding a suitable solution; pricing is secondary. Also, they should consider consolidating insurance solutions under one broker because carriers may, for example, be willing to take on your multi-million-dollar house in California’s brush territory if they are also insuring your less-expensive ranch in Idaho. You lose that benefit if you are dealing with multiple brokers.
CZ: Also, when you get a bill, pay it on time. If you let your policy lapse, you might not be able to get it back. And be really thoughtful about making claims. Putting through even a $50,000 claim might hurt your premiums and renewal prospects. Be sure to discuss every potential claim with your broker first. Then they will help guide you on whether or not it’s in your best interest to put forth that claim.
MR: And whenever you receive notice of a critical requirement—be it to trim brush or put in vents—follow through. Maybe you could ignore these in the past, but not anymore. Today, failure to comply might result in a policy cancellation.
CZ: And lastly, of course, our clients should know that we are always here to help with questions and concerns about their risk management strategy. ...
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Insurance market insights from Alliant Private Client leaders
The insurance market continues to evolve, making it a fitting time to address the challenges our clients may be facing. Over the years, we have found knowledge is the best way to help clients navigate uncertainty. As such, two of our senior leadership team members have come together to share their perspectives and insights on the current state of the market and what the future may bring.
Challenges in the current market
What worries you the most right now?
Cindy Zobian, EVP, Managing Director: While the challenging market was once contained to homeowner’s insurance, auto insurance and liability, rates are now also affected. We know this has all been very difficult for our clients. It’s understandably frustrating to see rates rise and hear about carriers leaving states. Mostly, I am always thinking about ways we can guide our clients through this market as seamlessly as possible.
Alliant’s response to the market challenges
So, how is Alliant meeting the moment?
CZ: We’ve gotten more creative, taking an even more holistic view of our insurance programs. We’re helping clients use deductibles and co-insurance to offset the hesitance in the market; high deductibles are more attractive to insurance carriers. We’re also getting multiple carriers to share the risk, minimizing the burden of any individual carrier.
The role of self-insurance
There’s more talk about self-insurance these days. What do you think about this option?
Mark Recht, SVP: Some clients are inquiring about this option, in which they will take on the financial risk of a possible loss instead of purchasing insurance from a carrier. We are always happy to discuss this as an approach as part of the broader risk management strategy and sometimes it is the right choice. However, ultimately most people choose to have some insurance protection because it can be difficult to reenter the insurance market once you’ve opted out.
CZ: Yes, we are always going to walk clients through the good and the bad of self-insurance; in the end, we want them to be able to make the decision that is best for them.
The future of the insurance market
Do you see any bright spots in today’s market?
CZ: We know that insurance is not the most exciting topic however, the market conditions are providing us the opportunity to have more frequent and substantive conversations with clients to develop customized programs that meet their unique needs. Clients want to understand their insurance program better, so they are better equipped to make strategic choices. And that’s a win for everyone because it leads to better overall risk management.
MR: We continue to collaborate with wealth advisors and other professionals to discuss risk management because they want to ensure that their clients have risk management programs that best meet their lifestyle and unique set of needs.
Understanding the complexities of the insurance market
Which aspect of the market is most difficult for clients to understand?
MR: The market challenges are not just impacting specific regions anymore. The current situation started in 2018 in California, after the wildfires, and then impacted Florida because of the storms. This impact is now being felt nationally, if not globally. That said, clients outside of catastrophic-prone areas are now feeling the impact of these weather-related events like ice storms, flooding, and tornadoes. Conversely, those who reside in catastrophic-prone areas do have the additional concern of carriers leaving the state, in part because some state regulations don’t allow carriers to set mutually beneficial rates.
Looking ahead: The future of the insurance market
What does the future look like?
MR: We’re optimistic. As more reinsurance capital becomes available and insurance carriers continue to seek innovative solutions, we are finding creative ways to tackle the challenges.
CZ: Yes, we’re going to continue to learn and evolve. Almost every day, we find additional ways to offset these challenges.
As Cindy and Mark shared, now more than ever, the proper insurance strategy is essential, both for property protection and wealth management purposes. As you review your goals and priorities, please don’t hesitate to reach out to your insurance advisor for guidance on your portfolio. ...
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Market update: why premiums and nonrenewals are rising
The insurance industry is in the midst of a correction due to a significant increase in catastrophic events such as hurricanes, wildfires, floods, and more. This has resulted in some clients facing challenges, ranging from higher rate hikes to non-renewals. Whether you have been directly affected or not, we want to educate you on the current market situation. To help you better understand what is happening, why it’s happening, and how you can mitigate its impact on your insurance program, we convened a group of senior leaders to answer frequently asked questions.
However, before we go into the details, let’s take a step back and talk about insurance more broadly.
Essentially, the market only functions because risks are pooled, and thus transferable. To cover one person’s home (or automobile or boat, etc.), carriers need to receive premiums from all their clients in an amount sufficient to offset their total exposure.
The downside: Your rates are not just affected by your personal claim experience, but also by all those in the pool with you. Insurance can’t work if rates are only raised for people who’ve made claims. So even if you have a clean record with no claims, you could experience a renewal where your rates go up because you are in an area that overall has had large losses.
The upside: While the ‘pooling’ of risk means you will be impacted by other people’s losses, it also means that in the event you have a major loss, you will likely be paid an amount that greatly supersedes the amount you’ve paid in premium over time. Say you pay an annual premium of $16,000 over the course of 20 years, then in year 21 lose a house that is insured for $4 million due to a fire, you have still come out ahead.
Alright, now to the FAQs...
Why is the market in this current state?
Although it may feel personal, the market conditions are not a direct affront to individuals. Instead, two main factors are driving the changes. First and foremost, extreme weather events have been increasing across many parts of the country. Examples include the rising number of wildfires in the West, which have doubled in the past few decades. While California and the Gulf Coast are particularly affected, the Northeast and Midwest have also experienced their share of challenges.
At the same time, major cities nationwide are also struggling with the effects of an increasingly crumbling infrastructure. Aging pipes in urban buildings have led to more costly water damage claims. For example, one of our carriers has paid nearly double this decade in water losses, and the number one reason is plumbing failures.
Furthermore, the rising costs of repairs and reconstruction have compounded the challenges. The demand for skilled labor in the rebuilding process now surpasses supply, and replacing high-end appliances and amenities comes at a steep price. It’s important to note that suitable temporary living arrangements during such times are also costly.
Ok, so how will this affect my premiums?
Where once we considered anything more than 10% on the high side, we now regularly see jumps of 20%-25% a year. We encourage you to contact your Account Executive regarding your specific program and how your premiums may or may not be affected.
Does the new reality impact me if I don't live in an at-risk area?
Its possible. Keep in mind, while you may live in an area less prone to catastrophic events, that doesn’t mean you are exempt from severe losses. Hailstorms in Wyoming, tornadoes in Texas and severe winter storms along the East, have all been areas with damaging losses over the past few years. Therefore, no area is truly immune to loss.
Even if one area within a region is not at risk of catastrophic loss, there may still be a raise in rates within that state. For example, premiums may go up on a townhouse in San Francisco because of wildfires in L.A. County. The reality is, the impact of these trends is nationwide. So, it is important to speak with your insurance broker as some markets are increasing their thresholds in certain areas and others are not writing any new business.
Is there any relief in sight?
It depends largely on science. If major weather incidents and the ensuing catastrophic losses continue or increase, carriers will then need to continue to adjust their exposure and rates accordingly.
What can I do to help myself?
To keep your premiums as low as possible, and your coverage intact, make your account look as appealing as possible to underwriters. That means sustaining small losses, utilizing higher deductibles and keeping your insurance available for catastrophic, worst-case events. This will also provide premium savings. For example, data suggests that properties with one water loss will likely realize another one soon—particularly in apartment buildings. If you put in a claim for a small water loss, you may be a riskier proposition to carriers. Therefore, taking care of small claims, could work in your favor when your policy comes up for renewal.
We also encourage you to comply with all the recommendations suggested by your insurance carrier and to pay your premiums on time. Brokers can no longer guarantee reinstatement if you cancel for non-pay.
Also, take the time to contact your broker and review all of your coverages. When acquiring new items or properties make sure you reach out to them to ensure you have the proper protection. If you still haven’t told them that you purchased a new car for your son months ago or you started investing in a wine collection – you should place a quick call and confirm coverage has been issued accordingly.
Lastly, if you live in areas with serious weather concerns and have experienced a non-renewal or a drastic rate increase, ask your broker about secondary markets. They’re not ideal, and coverage terms may not be as broad as your existing policy, but they’re better than nothing.
Anything else I should know right now?
If you plan to follow our advice and only put in claims for major losses, select policies with high deductibles. You can also get breaks on premiums by complying with any safety measures prescribed by your carrier. Even if you don’t think you need a leak detector or backup generator, putting one in anyway will maximize the credits. Hey, whatever it takes!
Always know we are here to guide you through this correction and any other insurance concerns as well. ...
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Cloudy skies and silver linings: an insurance market update
From the chilling reality of “nuclear” jury verdicts to the extreme climate events reshaping the insurance landscape, Alliant Private Client executives Cindy Zobian and Tyler Banks discuss how to dodge the cloudy skies and find those silver linings. ...
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The hidden risks in today’s luxury insurance market
High-net-worth households face rising risks from luxury homes in disaster zones to valuable assets like vintage cars and private staff. With insurance non-renewals on the rise, resilience is critical. Kama Moseley joins Julie Rison to discuss how today’s affluent families can protect their luxury assets in an unpredictable world. ...
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