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Did You Budget For A Change In Weather?

The Insurance Information Institute posted $1.5 billion in insured losses so far this year due to the near-record snowfall and prolonged extreme cold weather throughout much of the United States. There have been more than 175,000 claims paid for losses such as burst pipes from freezing, ice dams on roofs, roof collapses, downed tree limbs and power lines. Still, the premium increases seem harsh to unsuspecting community associations.

Condominium and attached-home Master Insurance Policies have been taking big premium hits at renewal due to severe weather in our area – going back to before the Joplin tornado.

Weather across the nation has been severe this past winter with the Polar Vortex, and claim costs continue to rise. Insurance companies have paid out millions to replace roofs at just one association, which in turn affects pricing for other community associations.

That is what insurance is for, right? Not in our neighboring states. Just look west to Kansas and Oklahoma, where there are 1-2% Wind and Hail deductibles, where roof claims are settled on the depreciated value of the roofs rather than replacement cost. This might hit Missouri at some point, but right now the premiums seem to be the punishment for our storms.

On the bright side, most detached home subdivisions will not have to worry about large premium increases because they do not have much property to insure, other than a clubhouse or monument. However, the owners may have noticed higher individual homeowner premiums for the past three years.

Solutions are often sought by shopping for a lower-price insurance company. There are occasions when a better premium can be found, but be certain it is apples to apples comparable coverage with a quality insurance company. It is not the Board’s fiduciary responsibility to save money at the loss of protection.

Often, there is no good solution to offset premium increases. Associations shop their Master Policies only to find there is no other insurance company offering a better price for the same coverage. This means many Associations will breach their budgets.

While avoiding insurance premium increases altogether is most likely impossible, there are practices that can help.

A higher deductible will lower the premium and also serve to avoid small nuisance claims which could increase the premium next year. Proactive initiatives such as obtaining reserve studies and adhering to the results creates a well-maintained association. Roof replacement schedules will keep the structures sound and more resilient to the storms.

Have you considered the hail-resistant roofing systems? They cost about 20% more up front, but look down the road at the potential high wind and hail deductibles.

Understand that your original budget may not have anticipated the events that will impact pricing in 2014 and beyond. An additional assessment of your prior budget may leave you better prepared for pricing and deductible increases that may result from historically high property damage and resulting claim costs.