I would be remiss if I didn’t point out that the New York Times has an article today discussing changes in homeowners insurance over the past decade:
The insurers say they have had to take defensive measures to stay in business and pay claims as operating costs have climbed. “If you’re being overly generous in covering risks and you’re not taking in sufficient premium, it doesn’t make business sense,” said Richard Ward, the chief executive of Lloyd’s of London, a large insurer of homes and businesses in the United States.
Yet some industry experts and consumer advocates say that efforts by the insurers to increase profits, after years of taking losses on home insurance, are shifting more of the burden of repairs and reconstruction to homeowners. The cutbacks in coverage, consumer advocates say, have contributed to the slow recovery of the Gulf Coast from Hurricane Katrina and will most likely hamper recovery from the recent wildfires in California.
The article isn’t quite as pro-consumer-biased as some I’ve seen. While the article does mention how homeowners was a loss-leader product in the 90’s, and recent changes have been made to address that, I would have been happier to see some reference to how homeowners profitability compares to other industries with similar volatility, and some mention of just how bad some of the mega-catastrophes that keep cat management folks up at night could be, unlikely though they may be.
Similarly, I also think the author of the article could have included what should be an obligatory exhortation to readers to double-check the limits on their homeowners policies (and/or to look into “inflation guard” automatic-coverage-A-increase features), as well as a reference to one of the holes in the National Flood Insurance Program—the relatively small maximum limits permitted.
However, all-in-all, it’s an interesting article to read on an otherwise slow news day, particularly if one is hiding from the Black Friday crowds. 