More Insurance Woes

It’s not just the condo associations that are finding it impossible to obtain full coverage upon renewal and seeing rates increased dramatically.  Homeowners with individual policies are also encountering the same issues.  After the last couple of articles I wrote about condo associations finding it financially unviable to obtain full coverage for their properties, I got a note from one of the larger agents that writes individual policies.  He’s been warning everyone who will listen about what we’ll see in 2024 and beyond.

 

Below is the rate increase information your insurance carrier got approved from the State Insurance Commissioner:

 

 

* You’ll notice the request Allstate has made to the state.  The commissioner will not approve a 100% increase. 

 

What I am hearing from every insurance agent I speak with is that in addition to the challenge of higher rates, underwriting guidelines are tightening up significantly.  Companies are not renewing policies for properties deemed to be a higher risk.  This is forcing agents to go to the surplus insurance markets to find coverage.  The surplus market rates are higher.

 

If you have a home with single wall construction, or your roof is 20 years or older, you may find that your current carrier won’t renew your policy.  Cluttered homes are fire risks.  If you have a touch of the hoarder in you, that could spell trouble.

 

The absolute last thing you want to have happen if you can’t get your current policy renewed is to do nothing.  If you let your policy lapse, you’ll find it even more difficult to find reasonably priced coverage.  Also, if you have a mortgage, your lender requires you to have insurance in place at all times.  If you don’t get a policy, your mortgage servicer will force-place coverage on your behalf.  Those policies are super expensive, usually 4-5 times as much as regular coverage.  Your mortgage servicer will put that policy in place and adjust your monthly payment.  I have witnessed incidents of a homeowner’s monthly payment going up so much that they no longer could afford the payment.  Eventually the home was foreclosed upon.

 

You should be speaking with your insurance agent annually anyway.  It’s good practice to connect annually to make sure you have sufficient coverage based on ever increasing costs to build – in case of a claim.  That’s also the time to find out about increases to your premium, or if you are running the risk of not getting your policy renewed.

 

 

 

 

 

 

 

And now the week’s economic news…….

 

Services Sector Improves 

With little significant economic news, it was a quiet week for mortgage markets.  The one major economic report released this week was stronger than expected and nudged mortgage rates a bit higher.

 

Since services account for roughly 75% of economic activity in the US, investors closely watch a key report on the sector from the Institute of Supply Management.  The latest data revealed that the ISM national services index rose to 53.4, above the consensus forecast and the highest level since August.  Readings above 50 indicate an expansion in the sector.

 

The Department of Labor releases the total number of new claims for unemployment insurance each week, and the latest reading was just 217,000.  This was down sharply from the inflated figures seen during the early months of the pandemic and a little lower than the levels which were typical during 2019.  Given the tightness of the labor market in recent years, this report reflects the reluctance of companies to let workers go.

 

One notable consequence of the stronger than expected labor market data last week and the services sector report this week is that expectations for a reduction in the federal funds rate have been pushed out until later in the year.  While some investors not long ago were saying that the first rate cut would be seen at the next Fed meeting in March, nearly all now anticipate that it will not take place until May or June.

 

 

 

 

Next Week

Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy.  For economic reports, the Consumer Price Index (CPI) will be released on Tuesday.  CPI is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services.  Retail Sales will come out on Thursday.  Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy.  Housing Starts will be released on Friday.

 

Until next week…….