Next risk from ice storm: whether to file insurance claim [Important information for us all]greenspun.com : LUSENET : Current News - Homefront Preparations : One Thread
By EMERY P. DALESIO : AP Business Writer Dec 13, 2002 : 10:45 am ET
RALEIGH, N.C. -- Tens of thousands of North Carolina homeowners are facing a choice after inspecting damage to their homes after last week's ice storm: To file or not to file?
The winter storm could result in up to $113 million in insured property damage, with as many as 60,300 claims filed, the North Carolina Insurance News Service said Thursday. Hurricane Floyd caused about $835 million in insured property damage in 1999 and Hurricane Fran caused about $1.3 billion in insured damage in 1996.
The problem is that many consumers believe their insurance companies could refuse to renew their homeowners policy if they make one too many claims.
The state Insurance Department has noted an increase in complaints this year from consumers who said their insurance company refused to renew a homeowners policy after they filed just one claim.
"It does seem to be a practice that has trended upwards for various reasons," said Insurance Department spokeswoman Chrissy Pearson.
"It's common to hear that it's one claim, two claims," she said. "Consumers should be aware of that possibility."
The number of complaints lodged about insurers quick to end a relationship were not available Thursday because complaints are recorded by company, not the type of complaint, Pearson said.
Consumers who file even minor claims, of $1,000 or less, risk being dropped by their insurance companies when their policies are renewed.
David Wood, an insurance professor at Appalachian State University and former insurance agent, said it's an expensive nuisance for insurers to handle many small claims.
"Insurers typically nonrenew people who have a high frequency of losses," he said.
The ice storm hit as U.S. insurance companies are dealing with reduced profits because of big losses from hurricanes and other lesser storms. Add to that investment losses in the stock market and fear of exposure from insuring homes in coastal areas and State Farm, the nation's largest insurer of homes, stopped writing new homeowners' policies in North Carolina and about 20 other states this summer.
State Farm has no guideline about how many claims will result in non-renewal and every policy is reviewed individually, spokeswoman Courtney Lowe said.
"There is no magic number," she said.
Nationwide Insurance Cos., the largest home insurer in North Carolina with about 400,000 policyholders, won't count a claim for ice storm damage at renewal time, said spokeswoman Holly Diefenbaugh.
"We don't count catastrophe-related claims, so they don't count against a policyholder when we review their claims history. In this event, the ice storm would definitely be counted as a catastrophe," she said.
Ronald L. King of Raleigh is one of those who fears losing coverage if he files a claim to repair his roof, which was speared by a tree limb, though he's paid three years of premiums for Liberty Mutual to insure his home and cars.
"If (the damages) are under $1,000, I may just pay for it myself," King told The News & Observer of Raleigh.
Marie S. Wright also is worried about losing coverage.
When Hurricane Fran destroyed the roof of her Raleigh home six years ago, she filed a $38,000 claim. Last week, a 100-foot pine tree snapped and punctured multiple holes through her roof, deck and gutter. Repairs could cost another $14,000.
"In both cases, the losses were beyond my control, and I hope that my insurance company will understand that," said Wright, who has been with the same insurance company, which she declined to name, for the past 35 years. "But with all these disasters, there is no telling what could happen. They could see two claims and assume that I'm too much of a risk."
Steve Hastings, who lives in rural Union County near Monroe, said his losses were too large not to file a claim.
"There was not a question that we were going to file," he said. "It'll be in the thousands. It was $2,000 just to get the tree off the house."
That's what insurance is for -- to cover a big loss, Wood said.
"Any claim that does not create some financial hardship should be absorbed by the consumer. Insurance is designed for those claims that create financial hardship," he said. "If you're going to have to be dipping into your children's college fund, then sure, that would be a claim I would make with my insurance company."
Homeowners unsure about filing a claim can ask their insurance agent how often they decide against renewing a policy, Pearson said.
"Ask them, have they dropped a lot of people over the past year," she said.
If your insurer decides to end its relationship with you, there are plenty of others to choose from, but you'll have to shop around, Pearson said. By law, you get at least 30 days notice of the company's decision, she said.
"There are homeowners insurers out there that continue to offer coverage on a widespread basis," she said. "We don't see a market where all of the companies are pulling out."
Worst-case scenario: there are two industry-backed plans for homeowners unable to buy more standard policies. The problem is the FAIR plan, for Fair Access to Insurance Requirements, and the beach plan are more expensive and don't offer liability coverage.
-- Anonymous, December 14, 2002