What’s happening in the current marketplace?
In year 2001, prices began to rise as a result of deteriorating profits, brought about by reduced investment income and high claims, The trend toward rising costs was then exacerbated by the terrorist events of September 11, 2001, which seriously impacted the reserves of many insurers. Rates rose at an alarming pace for most types of products. Finally, as we enter year 2004, we see a leveling off of costs for many of the property/casualty coverages. Beginning in 2006, we began to see a “softening trend” which continues in 2007. This trend results in a general reduction in premium levels for most property/casualty lines of business. Nonetheless, certain lines of business continue to be difficult to place and remain costly. “Hard markets” and “soft markets” have historically been cyclical in nature and these cycles are expected to continue into the future.
Medical insurance rates continue to rise, due to a combination of aging population, advances in technology, higher utilization, and the extremely high usage and cost of pharmaceuticals. We are hoping that utilization of higher deductible plans, combined with Health Savings Accounts may offer some stabilization of rates.
What is the difference between an Independent Insurance Agent and an Agent who sells for only one company?
An insurance agent who sells for only one company is heavily dependent upon that company for his or her livelihood. Generally, he or she has minimal access, if any, to insurance companies other than the one represented. An Independent Agent, on the other hand acts as a “broker” on behalf of his or her clients, providing each customer with a tailored insurance program to meet its specific needs. Since no single company is best in all areas, this approach often involves multiple insurance carriers for comprehensive coverage at reasonable prices.
Why Do Premiums offered by insurance companies differ so much?
This is a complicated question because so many variables are involved in the usual insurance transaction. However, one of the biggest reasons for the differences in premiums is that insurance companies “target” different groups of risks. For example, some companies prefer to write only homeowners insurance for homes valued in excess of $300,000 while other companies regard these homes as too risky. The “appetite” of any particular company is reflected in the rate structure it imposes. Another reason also not commonly understood by the insuring public is that different agents and brokers have relationships with certain companies that enable them to obtain better prices and coverages than their competitors.
What does it mean when someone says a company is “A” rated?
There are several insurance company rating services that do nothing but “rate” insurance companies for financial soundness, levels of reserves for payment of claims, administrative efficiencies, etc. These ratings are closely watched within the industry and are extremely important. One of the most widely known of the rating services is A.M. Best. Its ratings run from “A++” for the most solid insurance companies to “C” for ones that are usually not recommended by agents and brokers. Smart insurance consumers should be aware of these ratings. New insurers are consistently coming into being, and as such, are not rated for a period of at least five years. Thus, because ratings are not available, we have a due diligence process to assure financial security for our customers when providing coverage through non-rated companies.
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