Despite Maine’s cool, wet June weather, pool season is here once again. Swimming pool insurance is important to protect your family, friends and financial assets.
Sobering Water Safety Statistics
Drowning is second only to auto accidents as the most common cause of unintentional injury-related death for children under 14, according to the American Red Cross. According to an ARC survey, 48% of respondents said they had nearly drowned at some point in their life.
Pool injuries aren’t limited to the water, either. Slippery deck surfaces and other equipment can cause trouble too. The Red Cross’ web site has excellent water safety advice.
Five Smart Pool Insurance Tips
Make Sure Your Pool is Up to Code
Plumbing, fencing and deck requirements can vary by locality. If your pool doesn’t meet current codes, your risk increases greatly.
Supervise Pool Activity
And it only takes seconds for tragedy to happen. Make sure a strong-swimming adult is present when the pool is in use. Use an alarm to prevent accidental, unsupervised or unwanted use of your pool.
Pool Insurance Requires a Fence and Lock
This is required in most locales for in-ground pools and for many above-ground pools.
Carry Adequate Pool Insurance
If someone is hurt while using your pool, insurance may be the only thing between you and bankruptcy. Make sure your liability limits are high enough to protect your net worth and earnings potential. A great idea: buy an umbrella policy, which provides even higher limits than homeowners coverage.
Consult Your Insurance Agent
Many insurers do not charge an extra premium for swimming pools, but they usually have underwriting requirements. These are designed to manage the company’s – and your – risk. For example, many companies will not insure pools with slides or diving boards, or without locking fences.
Don’t let tragedy spoil your summer fun when warmer weather finally comes to Maine. If you live in southern Maine and have a swimming pool, contact Noyes Hall & Allen Insurance for a review. We offer a choice of Maine’s top insurance companies. We’re independent and committed to you.
Rate Increases, Cancellations and Coverage Reductions – What You Can Do About It
It’s clear that Maine property insurance is facing challenges in 2024. Homeowners are feeling the impact. Rising rates, policy cancellations and coverage cutbacks are common. It’s not just a coastal problem. People all over Maine are discovering that insurance underwriters hold the cards in this market. How and why is the insurance market so hard right now? Do you have any recourse? What can you do to control costs?
What’s Going on in the Maine Property Insurance Market?
Why Property Insurance is So Painful in 2024
There are many reasons, but they all come down to cost. Insurance is designed to share costs and spread risk. Claims of the few are paid by the many through insurance premiums. Insurance companies are well-funded. They have reserves to pay out more than they collect in premiums for a short time. But those costs are then passed on. Otherwise, the system falls apart and everyone loses.
Insurance claim costs have spiked in many areas for various reasons. They include:
Inflation in materials – Rising costs for building materials, auto parts, and medical supplies contribute to higher claim expenses.
Increased claim severity – More frequent and severe weather events, changes in property use, and an increased number of seasonal and secondary properties lead to larger claims.
Longer repair times – Shortages in parts, materials, and labor result in extended repair durations, impacting expenses for auto rentals, temporary housing, and commercial relocation.
Reinsurance costs – Insurance companies buy reinsurance to protect themselves from disasters. Shrinking reinsurance capacity since 2020 has led to price hikes for insurers.
Catastrophes Can – and Do – Happen in Maine
Mainers often think that weather disasters happen “somewhere else”. But they do happen here. And lately they’ve been more frequent.
Verisk defines a catastrophe (“CAT”) as an event resulting in more than $25 million in insured losses. Regional insurers may see an average of 4-5 “CAT” events per year in Northern New England. In 2023 there were 8.
There aren’t just more catastrophes than normal. They’re bigger too. Their 2023 expected payout for damage from CAT claims was nearly 8X an average year. We don’t see signs of improvement right away. 2024 started with a major wind and rainstorm.
Changes in Your Maine Property Insurance
Maine property owners are seeing a lot of changes in their insurance. Most of it is not good news. Here are some things you might experience:
Increasing rates – Even homeowners with no claims experience are facing rising rates, with the current average increase around 17% in Maine.
Saying “no” -Moving to a different insurance company during this time can be risky, as many insurers decline to quote on properties they consider higher risk.
Tougher inspections – Insurers are inspecting properties more often and more closely. They’re focusing on roof condition and overhanging trees. Some are even using aerial photographs to spot hazards.
Bumping deductibles – Many coastal properties now have big wind deductibles. Some insurers are increasing deductibles across the board. Others are only increasing deductibles if you’ve had several claims.
Mandatory alarms – Insurers require owners of high value or secondary homes to install central alarm systems to warn against water leakage, low temperature, fire and burglary.
Required increases in insurance amount – Building material and labor cost increases mean higher costs to rebuild your home. Insurers review that cost periodically and require you to insure to the full rebuilding cost. (Although it costs more, it’s important to make sure you have enough insurance to rebuild – this is a benefit).
Cancellation or non-renewal – Insurers may cancel policies due to claims or if homeowners fail to make necessary improvements after an inspection.
Is All of This Legal?
The Maine Bureau of Insurance plays a crucial role in regulating insurance companies offering Maine property insurance. Here are some key points:
Rate Approval and Policy Changes
The Bureau approves rates for insurers authorized to do business in Maine.
They also permit cancellation or non-renewal for certain reasons. Those reasons include failure to comply with reasonable loss control recommendations or failure to permit inspection.
Insurers can make changes to policy terms, which is known as a “conditional renewal.”
If an insurer decides not to renew your policy, they must send you a “legal notice of non-renewal.”
Challenging a Non-Renewal
As a policyholder, you have the right to challenge non-renewal by appealing to the Maine Bureau of Insurance.
However, insurers typically adhere to non-renewal rules, making successful appeals less common.
How to Control Maine Property Insurance Costs
Although you can’t completely avoid large market forces, you can do some things to control your Maine property insurance costs and protect your property.
Pro-actively protect your property – regularly trim trees and shrubs away from buildings. Install a generator or backup sump pump. Keep gutters clean. Use a low-temperature alarm if you’re often away from the property.
Keep up on maintenance – take care of peeling paint or moss or debris on your roof. Replace roof shingles before you get water damage (hint: like tires, shingles don’t usually last as long as the warranty may say).
Stay claim-free – Small insurance claims sit on your record for 5 years or more. Many insurance companies decline to insure new properties if they have multiple property claims.
Watch your credit score – insurers “score” policies to set rates. An insurance score is closely related to your credit score. The better your score, the lower your rate.
Choose a local insurance agent – Local knowledge can be the difference between getting property insurance and not. National insurers and 800 number agents don’t know your area like a local advocate.
Communicate with your insurance agent. Let them know if you make improvements, install alarms or generators, or pay off your mortgage. All of those might reduce your insurance premium.
Help Navigating Maine Property Insurance
If you own property in Southern Maine, contact a Noyes Hall & Allen Insurance agent in South Portland at 207-799-5541. We offer a choice of Maine’s top insurance companies. While we don’t control the market, we have a good perspective on current conditions. We can help you find the best fit and value for your property insurance.
Frozen pipes happen quickly in frigid weather. All it takes is one small area with insufficient insulation to cause major water damage.
Greater Portland and Maine could experience the coldest air mass we’ve seen in years. If you’ve made recent improvements to your home or business (additions, remodeling, new heat systems, etc.), this will be the harshest test your property has had to endure since then. Here’s how to avoid damage from frozen pipes, and what to do if your pipes freeze.
In Very Cold Weather
Open cupboard doors below sinks. This allows warm air to circulate, and helps keep pipes from freezing.
Turn on hot and cold faucets enough to let them drip slowly. Keeping water moving through the pipes prevents freezing.
If You Leave for More than a Day
Keep the temperature at a minimum 65 degrees F. People often set their thermostats lower than this and assume they’ll be ok. They find out the hard way that the temperature in the living or working space may be fine, but the temperature inside the walls, where the pipes are, may not.
Have someone check your property regularly. If your pipes freeze or water leaks, early discovery saves major damage.
Use a “low-temp alarm”. Plenty of inexpensive wireless devices can text or call you if the temp drops inside your property. Even better long-term solution: install a low-temperature alarm into a monitored security system.
Think You Have Frozen Pipes?
Don’t wait for them to burst.
Take measures to thaw them immediately, or call a plumber for assistance. Do NOT attempt to thaw them yourself with any sort of flame!
If your frozen pipes do burst…
Even a 1″ split in a pipe can cause thousands of dollars in damage in minutes. You need to act quickly to prevent additional damage.
Turn off the water at the main shutoff valve.
Clean up the water. You don’t want more damage than you already have. An insurance adjuster doesn’t need to see the water, but will want to inspect any damaged items.
If you have a lot of water, contact a remediation contractor. Your insurance agent can help you locate one.
Prevent further damage. Protect or remove any carpets, furniture, inventory or other items that can be damaged from further seepage.
Making an Insurance Claim for Frozen Pipes
Many standard homeowners and business property policies cover water damage resulting from frozen pipes. Not all policies are alike. Contact your agent to be sure what your policy covers.
Make temporary repairs and take other steps to protect your property from further damage.
Save receipts for what you spend and submit them to your insurance company for reimbursement.
Make a list of damaged items. If your home is so severely damaged that you cannot live there, save the receipts from any additional living expenses you incur for accomodations while repairs are being made.
We hope you and your property remain safe and warm through this cold weather.
Ice dam damage is a common problem in Maine and other cold weather areas. Learn the warning signs and how to prevent damage here.
Icicles and Ice Dams
You can have icicles on your roof without an ice dam. They affect different parts of your roof. But icicles hanging from eaves and gutters are often a warning sign of an ice dam on the roof. Ice dams and icicles are both caused by the freeze – thaw cycle.
Icicles form when ice or snow melt from your roof and freeze on the edge. They can be very heavy. When they fall, they can damage property or injure people.
Ice dams occur when snow melts and then re-freezes on your roof. If melted water works its way under your roof shingles and refreezes, it expands. Ice can trap (or dam) water on the roof, causing it to pool and back into the building. The resulting roof leak can cause damage inside the building. Untreated, it can cause mold and rot.
Insulation and Ventilation Prevent Ice Dam Damage
Proper insulation and ventilation help prevent the freeze – thaw cycle that creates ice dams. The goal is to keep your roof cold.
Good insulation between the ceiling and roof is key. Pay particular attention to openings like vents and hatches. EfficiencyMaine is a great resource to learn more about insulating – and saving heating and cooling costs. You can even set up an energy assessment.
Ventilation is another key. Allowing cold air to circulate between the insulation and the roof keeps your roof cooler. That reduces the freeze – thaw cycle that causes ice dams.
Maintenance Tips to Prevent Ice Dam Damage
Good maintenance is another way to avoid damage from ice dams.
Clear leaves and debris from downspouts and gutters before winter.
Allow downspouts and gutters to flow freely. Keep them free of snow and ice.
Rake snow from your roof with a special roof rake. Roof rakes allow you to stand on the ground and clear your roof, reducing chance of a fall or other injury.
Never chop ice with any sharp tool or hammer. This can damage your roof!
Trouble Signs
Look for these signs that an ice dam may be forming:
Icicles.
Water damage on inside ceilings or walls.
Exterior paint damage.
Your roof is clear when your neighbor’s is snow-covered. This can be a sign that your insulation is inadequate.
Ice Dam Damage and Insurance
Your home or business property insurance may cover water damage caused by ice dams. Sometimes, roof shingles are undamaged by ice dams, but water leaks inside. Check with your insurance agent to see if your home, condo, renters or business policy covers ice dam damage.
If you live or have a business in Southern Maine, including Greater Portland, contact a Noyes Hall & Allen Insurance agent at 207-799-5541. Because we offer a choice of many insurance companies, we can compare options to find the right fit for you.
Insurance rates will increase in 2023 for individuals and businesses. Insurance people increasingly expect what they call a “hard market”. Underwriting gets tighter. Insurance rates rise. Appetite for risk shrinks. It’s part of the natural insurance cycle. Here’s why we’re seeing it now.
Insurance Rates Rise in Uncertainty
Insurance companies use history and future expectations to set rates. When they feel confident in their claim predictions, rates are more stable. When confidence is lower, their risk of getting it wrong is higher. That means prudent insurance companies have to charge more “just in case”.
These are uncertain and risky times. Weather and natural disasters are more extreme and difficult to forecast. Moreover, economic signals are mixed. Supply channels are challenged. Even public health is in flux. All that uncertainty prompts insurers to set rates cautiously. They need make sure they’ll be able to pay claims.
Inflation Affects Insurance
We all feel the effects of inflation. Prices are higher for everything from groceries and gas to lumber and plumbers. Insurance companies feel it too. Medical expenses, auto repairs rental, used cars, building materials and costs all increased dramatically during and after COVID.
Some of those costs have settled, but none are where they were before. Meanwhile, insurance companies had to pay 2020 claims with premiums collected using 2019 rates – before anyone knew what was coming.
Insurance Rates Rise After Disasters
Wildfires, tropical storms, temperature extremes, droughts and floods and other disasters are more frequent. Insurance companies have paid billions in property claims. It makes no difference whether they believe these are trends or blips. Insurance companies need to prepare to collect enough premium to pay losses.
The Reinsurance Effect
You buy insurance to protect your family or business from disaster. Insurance companies do the same. They buy reinsurance each year to protect them from going bankrupt due to a catastrophe. Of course, reinsurers set their rates based on losses and projections, too. Now, the property reinsurance rates that insurance companies pay are rising by double-digits. Insurance companies pass that cost on to consumers as part of their rates.
In Maine, we’re fortunate not to have many of these disasters. But we still share in the losses of other regions through reinsurance rates. And, we have harsh weather, too – remember the Ice Storm?
Insurance Rates Vary – Choice is Important
Although insurance costs are higher across the board, each insurer sets their own rates. That’s why it’s important to compare coverage and price to find the best value. As an independent insurance agency in South Portland, Noyes Hall & Allen Insurance offers a choice of several preferred insurance companies. Contact a Noyes Hall & Allen agent. We can help you compare and decide which is the best fit for you. We’re independent and committed to you.
Portland and South Portland Maine recently passed ordinances expanding outdoor seating options for local restaurants. These respond to indications that coronavirus is less likely to spread outdoors. Soon, some local restaurants will be able to serve patrons :
on sidewalks
in parking lots or closed streets
in on-street parklets.
Transitioning a Restaurant to Outdoor Dining
Outdoor dining isn’t for every restaurant. Depending on your cuisine, location, formality and clientele, you may choose not to serve al fresco. If you do, here are some things to consider.
Check city rules and resources. Portland and South Portland city web sites have the ordinances and applications for permits and street closures.
Up your cleaning game. During the COVID threat, you’re already doing extra cleaning and disinfecting. Outside adds new cleaning challenges: pollen, dust, litter and even insects.
Keep it light – and smooth. Make sure there’s enough light for employees and customers to see well. Paint or tape the edge of irregular surface levels. Avoid loose cords and other trip hazards.
Watch the skies. That includes the sun. Plan your seating to avoid excessive sun exposure during meal service, if possible. Summer thunderstorms can develop fast. Have a plan to quickly evacuate your dining area and secure umbrellas and other furniture. That will help avoid injury and damage.
Beware of vehicles. Create barriers between diners and vehicles – including bikes and scooters that might be on sidewalks.
Watch outdoor flames. Keep propane heaters, cooking equipment and other heat sources away from flammables like fabrics and awnings.
Check your insurance. Many liquor liability policies only cover you “on premises.” Does that extend to a parking lot or street? The same with property insurance for your outdoor seating and fixtures. Ask your agent about your insurance coverage.
Do you own a Portland Maine area restaurant, cafe, food truck, brewery or other food service business? Contact a Noyes Hall & Allen Insurance agent in South Portland at 207-799-5541. We’re local business owners, just like you. We offer a choice of Maine’s top business insurance companies. We’re independent and committed to you.
Natural disasters are on the rise, putting business owners at risk of suffering damage or loss of business property. A big disaster can literally put you out of business.
If you own a business in Maine, your customers and employees depend on you to prepare for the worst. Commercial insurance from Noyes Hall & Allen Insurance is one way to protect your business from disaster damage. Here are a few other ways to prep your small business for natural disasters.
Employee Disaster Readiness
Develop a plan for your employees, so they will know what to do in the event of a disaster.
Make sure that employees know who to contact and how to reach key personnel when needed.
Create an evacuation plan that employees can easily follow if they have to escape in a hurry.
Update new employees on disaster readiness so everyone is well-informed on what’s expected of them if disaster strikes.
Communicating with Clients after a Disaster
If your customers can’t reach you after a disaster, they may find someone else who can help. Don’t jeopardize your business. Have a plan to continue your operations, and let your customers know where to find you.
Have a plan in place to communicate with key clients after a disaster.
If your building is severely damaged, you may need to open a temporary location to continue operations. Thinking about possible options before disaster strikes can save valuable time following a disaster.
Protecting Essential Data after a Disaster
Make sure your primary data is backed up digitally to prevent loss in a disaster. This includes financial records, employee and customer information, and any other critical data you need to keep your business running. Cloud backup is the safest, most secure means of protecting essential data from natural disasters.
Commercial Insurance Coverage
Purchase adequate commercial insurance for your building, business equipment, and inventory. Just as important, be sure you have business interruption coverage. Many businesses have enough insurance to replace what they lose, but not enough to recover lost earnings. This can cause your business to fail.
Maine Business Insurance
For information on commercial insurance coverage and costs, contact Noyes Hall & Allen Insurance in South Portland, ME. We offer a choice of Maine’s top business insurance companies. We can help you find the right fit for your business. We’re independent and committed to you.
by Kayla Bachelder, Concierge Agent, Noyes Hall & Allen Insurance
Ahh, a stormy night at home. Nowhere to be. You’re on the
couch with a nice cup of tea, wrapped in your favorite blanket, about to watch
your favorite movie.
What’s that? Did the lights flick—oh no! Power outage!
Silence. The dog growls in the sudden darkness. The cat
springs from his favorite spot on the back of the couch, causing you to spill
your hot tea everywhere. Complete chaos! How long will the power be out? What
will go wrong before the lights come back on?
The Ultimate Defense: Generators
If you have an automatic generator, nothing changes. Critical heating and cooling systems and lights stay on. You continue to sip your tea, pet your cat and watch your favorite movie (some insurers offer a homeowners discount for automatic generators – ask your agent).
If you have a portable generator, it takes a few
minutes to hook it up. Then you can power your most important appliances and
lights. You may now carry on with your night.
Tips for portable generator owners:
Save instructions for properly setting up your generator. Don’t rely on your memory to do it safely.
Power outages can be unpredictable, and you never know how
long your power may be out. Always be prepared.
Prune trees back from your house. Even healthy tree limbs can succumb to wind or ice storms. Reduce the risk of damage or loss of electricity. Remove limbs that overhang your home, fences or driveway.
Keep your chimney clean. People who rarely use their fireplaces or wood stoves often postpone chimney cleaning. During ice storms, we’ve seen house fires caused by dirty chimneys.
Always have plenty of fuel for your generator and any outdoor cooking appliances.
If you have an electric sump pump, consider installing a gravity activated backup.
Create an emergency blackout kit. Store it somewhere accessible. It won’t be helpful in the back of a closet, or out in the shed.
Emergency Blackout Kit Essentials:
Basic first-aid supplies
Flashlights (avoid using candles)
Drinking water
Extra batteries
Emergency numbers & contacts (incase your cell battery dies)
Backup supplies for your children and pets: diapers, food, etc.?
Canned food is always good to keep on hand in case you can’t get to a store.
Preparing for a Regional Emergency
After a big storm or other regional emergency, power may be out for several days. Are you prepared?
When a Big Storm is Forecast
Freeze containers of water to help keep refrigerated food cold.
If your water comes from a well, fill your bathtub with water. This will allow you to flush toilets, etc.
If you rely on an electric sump pump to keep your basement dry, lift items off the floor.
When the Power Goes Out
Leave the refrigerator and freezer closed. A Full freezer will hold food safely for up to 48 hours. A refrigerator will keep food cold up to 4 hours. After that, in cold weather, store food outdoors, in coolers.
Turn off electric appliances that were on at the time. This can help avoid a power surge when the electricity comes back on.
In winter, open kitchen cabinets to allow the warmer air in the house to reach your water pipes. Pipes are often against cold outside walls. Those walls are even colder when the house has no heat or hot water running through the pipes.
If you don’t have a fireplace or wood stove, go elsewhere if the temperature drops too low. NEVER use a gas cook stove or oven to heat your home.
Use gas or charcoal grills or camping stoves outside – never indoors.
When driving, treat an inoperable traffic light like a four way stop.
When the Power Comes Back On
Check cooking equipment and other appliances to make sure
they’re off.
Unsure if your food is still good? Toss it! Better to be safe than sorry. Make a list of the items you discard. Some homeowners insurance policies cover spoilage of refrigerated food. Contact your insurance agent to see if your policy does.
Answers to Your Insurance Questions
Do you live in Southern Maine? Have questions about insurance for frozen pipes or food spoilage? Concerned about water backing up into your basement? Call a Noyes Hall & Allen Insurance agent in South Portland at 207-799-5541. We’re independent and committed to you.
We offer a choice of Maine’s preferred home, condo and renters insurance companies. We can help you find the best insurance value and answer your questions.
When the blows hard many homeowners and business owners discover that their insurance policy has a wind deductible. Windstorm insurance deductibles have been common in the Southern US for years. In Maine, they’re more commonly found on insurance policies for coastal or island properties.
Not every insurance policy in Maine has a separate wind deductible. If your policy doesn’t list one, then your regular property deductible applies to wind damage.
Wind Deductible Amounts – Flat or Percentage
Most homeowners and business property policies have a flat deductible that applies to all causes of loss. These are fixed dollar deductibles. For example if your deductible is $1,000 it applies whether you have a break-in, fire, water or wind damage, you pay the first $1,000.
Many wind deductibles are “percentage deductibles“. The deductible is a percentage of the insurance amount, NOT the actual loss. For example, if your home is insured for $500,000 and has a 1% wind deductible, a $5,000 deductible applies to wind damage, and your flat deductible applies to other causes of loss.
Common Types of Windstorm Damage in Maine
Wind blows a tree onto property, damaging it.
Wind damages roof shingles or siding.
Wind-driven rain lifts shingles and siding, allowing water into the building.
Three Types of Wind Deductible in Maine Insurance
Hurricane deductibles
“Named Storm” deductibles
Wind deductibles
Hurricane Insurance Deductible
A hurricane deductible only applies if your wind damage was caused by an actual hurricane. If your property is damaged by wind during any other kind of storm, the deductible doesn’t apply. Insurance policies define when a hurricane deductible applies. Usually it’s during the time and place that a hurricane watch or warning is in effect.
“Named Storm” Insurance Deductible
“Named storms” include tropical storms and depressions, as well as hurricanes. These occur more frequently, so “named storm” insurance deductibles are more likely to be applied. A homeowner would rather have a hurricane deductible.
Historically, “named storms” were limited to tropical cyclones. But in recent years, the National Weather Service has begun naming winter storms. Does wind damage that occurs in one of these named winter storms cause the “named storm deductible” to apply? That’s unclear. In our South Portland Maine insurance agency, we haven’t heard of an insurance company invoking that. But, it could happen.
Wind Damage Insurance Deductible
Wind deductibles apply to all kinds of wind damage, including those caused by hurricanes, named storms, or other wind. Even moderate winds can cause damage to property. A homeowner or business owner would prefer a hurricane deductible or a named storm deductible to a wind deductible. That’s because windy days happen much more frequently than hurricanes.
Which Insurance Companies Use Wind Deductibles?
Some insurers use only hurricane deductibles. Others use Named Storm deductibles. Still more use wind deductibles. And some don’t use wind deductibles at all.
Each insurance company has its own guidelines. Some large national insurers use a wind deductible for any property within 1 or 2 miles of the coast. That’s a lot of homes in Maine. Many use special deductibles for properties within 1000′ of the coast.
The geography of Maine’s coast varies greatly. South of Portland, much of the coast is low-lying beaches open to the Atlantic. This allows ocean windstorms to affect properties farther from the shore. North of Portland, the coast is more rocky and rugged. Many elevated peninsulas create leeward inlets and protected harbors.
Some insurance companies that understand Maine underwrite these coastal areas differently. They may require a special deductible for properties more exposed to wind, and not for others.
Does Your Insurance Policy Have a Wind Deductible?
If your policy has a separate windstorm deductible, contact Noyes Hall & Allen Insurance in South Portland at 207-799-5541. We offer a choice of many of Maine’s preferred home and business insurance companies. Depending on the location of your home, we may find an insurer willing to insure your property with a flat deductible. This could save you thousands of dollars in case of windstorm damage.
Insurance companies pool risk. They collect money from many people to pay the losses of a few who have claims. Everyone’s rates go up or down, depending on the insurance company’s experience. More claims paid = higher rates.
You may be wondering:
How much do hurricanes, wildfires and other disasters affect insurance rates?
Do disasters in other states affect my insurance rates in Maine?
It’s helpful to understand how insurance companies price their product. Insurance rates are recommended by insurance company actuaries. They project how much money the insurance company must collect to pay claims and make a profit. This requires complex modeling and formulas. Actuaries recommend rate changes to a special committee of company executives. The committee compares the actuary’s recommendation to the company’s profitability and growth targets. They agree on a proposed rate change, and submit it to Maine insurance regulators.
The regulator’s job is to make sure that insurance rates are:
Adequate to pay claims
Not excessive
Not unfairly discriminatory.
Regulators may approve or deny the rate change, or ask for more information.
What Factors Affect Insurance Rates?
At its simplest, insurance is “money in…money out.”
Money In = Premium Collected
Cheap insurance rates may leave the insurance company with insufficient money to pay claims and make a profit. Rates that are too high may send customers fleeing to other insurers.
Money Out = Losses
The most important determinant of insurance rates. More losses than expected puts pressure for the insurance company to raise rates. Fewer losses puts downward pressure on rates.
But here’s the rest of the story:
Insurance Company Financial Strength – Well-managed insurance companies keep adequate reserves to pay claims on a rainy day. Insurers with strong financials can weather a bad year without huge rate increases. Weaker ones need more frequent rate adjustments. The best way to learn the financial condition of an insurance company? A.M. Best tests the financial strength of insurers and assigns them a letter grade.
Type of Insurance Company – Mutual insurance companies are owned by their customers. After they pay claims, mutuals store their profits to pay future claims. Other insurance companies are stockholder owned. Stockholders expect a return on their investment. Investors pressure executives of publicly held companies to improve profits every quarter. This can lead to larger or more frequent rate increases to stay ahead of current losses.
Reinsurance – Almost every insurance company is also an insurance consumer. They buy insurance against “the big one”. This is called reinsurance. Most companies reinsure against annual total losses exceeding a certain amount. This dampens the impact of multiple hurricanes, fires or other disasters in one year.
Generally, larger insurers buy less reinsurance than smaller ones. Smaller insurers have less surplus, and thus are more vulnerable to catastrophic losses.
Of course, reinsurers are also insurance companies. They must collect more premium if they suffer unexpectedly large claims. Insurance companies pay different reinsurance rates based on their individual loss experience.
Do Disasters in Other States Affect My Insurance Rates?
Probably not as much as you think. Maine insurance regulators only allow insurers to file rates based upon Maine premium and losses. Claims that a company pays in California or Florida are not baked into Maine insurance rates.
BUT…
Insurance companies factor nationwide overhead costs into Maine rates. Cost like advertising, salaries – and reinsurance. Since events outside Maine influence reinsurance costs, they influence Maine customers’ rates. Just less than you might expect.
