Homeowners Insurance: Elements, Financials, and Challenges
Explore the key elements of homeowners insurance, the financial aspects affecting premiums, and challenges faced during mass disasters. Learn how insurance is a zero-sum game and the implications for policyholders and insurance companies.
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Presentation Transcript
The Cases Flood is not covered Flood is a common sense term VLP only applies when the property is totaled from a covered risk No flood.
Elements of Insurance State regulated and chartered. National umbrella companies, but each state company is separate. No federal regulation. State regulator goals Low premiums. Pay claims when they are made. Assets for paying claims Company capital Reinsurance Borrowing through bonds or other financial vehicles.
Financials Premiums Based on value of the property and the risk Set by regulators. Capital Higher capital, lower profits Good investment income, lower premiums Bad investment income, higher premiums Level required set by state regulators Reinsurance No regulation of the industry Higher the more risk Level required set by state regulators. Higher reinsurance costs or higher requirements for reinsurance levels, higher premiums.
Mass Disaster Problems Payouts can exceed combined capital and reinsurance. Company goes bankrupt, claims fall to the state to be paid. Florida Citizens, Louisiana Citizens. Not enough adjustors to get the claims paid quickly. Penalties for unfair claims practices Is the answer to require constant staffing for mass disasters?
Insurance is Zero Sum Game The more the company pays out, the higher the premiums going forward, or the company goes bankrupt and the state pays. State companies have higher rates. How does the tort world play out?
