Beliavsky wrote:
- quote -


I thought that was a really interesting article (well, for insurance
anyway!). Insurers weren't setting premiums high enough because they
didn't factor in the possibility of large catastropic events, simply
because they hadn't happened before (before Hurricane Andrew). Similar
reasoning to, "home prices never go down." The insured losses from
Andrew in Florida were apparently greater than the total premium that
had ever been collected in the region. Hard to run an insurance company
given that framework -- you have to jack the rates.

A series of more-expensive catastrophic events (on the scale of Katrina)
could well lead to much more expensive pricing of homeowner's insurance,
to finance the mega-events that may occur over the next 10, 20 years.
Payout ratios would look even lower than they are today. Not because of
price-gouging, but because of the higher cost of reinsurance. The
article implied that these big events may be beyond the claims-paying
ability of private insurance.

-Tad

You didnt add in investment return which can be considerable.
On the life insurance side, a popular hook now is promise to
refund all the premiums after a certain term because they
make more the premiums and insurance payouts.

On Jul 31, 12:15 pm, Beliavsky <beliav...[at]aol.com> wrote:
- quote -

The article is now online at http://www.bloomberg.com/news/market...07_story1.html
. The Wall Street Journal has an article today about how many
homeowners are being forced to go without insurance for wind damage
because their policies have been cancelled or because the premium have
been raised sharply. An recent article "In Nature's Casino"
http://www.nytimes.com/2007/08/26/ma...94f0ec&ei=5070
in the New York Times magazine by Michael Lewis talked about the
pricing of catastrophe bonds and cycles in home insurance rates.

On Tue, 31 Jul 2007 15:04:04 -0500, Tad Borek <borekfm[at]pacbell.netwrote:

- quote -


True and this statistic said nothing about rejecting any claims.
Thumper

Elle wrote:
- quote -

Would more claims affect this particular statistic?

-Will

On Jul 31, 12:15 pm, Beliavsky <beliav...[at]aol.com> wrote:
- quote -

Has anyone examined this on a smaller scale like car insurance? I
just paid off my car and I've been seriously considering dumping the
collision and comprehensive insurance. If I totalled the car or it
were stolen, how badwould it be? Well, it would certainly suck,
there's no doubt about that. But honestly, it wouldn't be that big of
a deal. I would just go out and buy a new car. Or maybe a used one.
But I wouldn't be ruined, financially.

On the other hand, the insurance only costs me about $10 / month (I'm
with USAA). So it's not like dumping it is going to save me a lot of
money.

There was a similar thread about a year ago about dental insurance.
Elle, didn't you start that one? Someone was asking whether or not it
would better to just take the money you would put toward dental
insurance premiums and save them to pay for dental work, yourself.
Made sense to me.

--Bill

Beliavsky wrote:
- quote -


B-
Haven't see the article but just those stats aren't compelling, there's
a cycle to payouts based on catastrophic events. Given that 2006 was
such a slow year for storm claims (no hurricanes hit the US), I'd expect
US home insurers' loss ratio to be unusually low that year. Especially
because of all the premium increases and changes in underwriting after
Katrina. In P&C overall there has been a change in pricing for storm
risks, because of higher storm activity. Allstate specifically made some
big changes and even got out of higher-risk markets. More premium, fewer
claims, and you get to 58%. Two major hurricanes, a 6.5 quake, or a big
fire season and it goes the other way.

It may well have overshot but only if it stays low for an extended
period would it be an issue. And if it's too high...competition should
weed that out in the form of lower premiums. The most I'd say is "shop
your policy" but foregoing home insurance is for most people an
unacceptablly large risk.

-Tad

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:YKJri.12767$rR.10583[at]newsread2.news.pas.earthlink.net...

- quote -

That is possible, but it is hard to believe that "more questionable claims"
account for a difference between 79% and 58%. Of course, insurance companies
seem to regard many claims about wind damage from hurricane Katrina as
questionable. They might prefer to put them in the category of flood damage,
meaning less or no payout. But such logic on the part of insurance companies
is Questionable (with a capital Q).

If it is possible to collect statistics about payouts declining from 79% to
58%, then it should also be possible to collect statistics about the
frequency of fraudulent or doubtful claims, Of course to make any sense it
would have to be done by an independent agency not beholden to insurance
companies. But if it were done properly, I'll bet the decline from 79 ti 58
would turn out to be related to conservative politics and companies "seizing
the opportunity" in the present day business climate to stick it to
consumers, not to fraud on the part of consumers.

"Beliavsky" <beliavsky[at]aol.com> wrote
- quote -

I agree it's worth wondering, but as you and others probably
know, it seems to me there's a question of whether folks are
making more claims, and also somewhat more questionable
claims, these days, too. Seems to me I have read that this
has been the case in recent years.

The September 2007 issue of Bloomberg Markets magazine has an article
"Insurance Hoax" by David Dietz and Darrell Preston critical of home
insurers. The article says that Allstate paid only 58% of home
insurance premium income as claims in 2006, compared to 79% in 1996.
Throughout the property-casualty industry, the payout ratio declined
from 64% to 55% from 1996 to 2006.

Given such a big spread, I wonder how much sense it makes to forgo
home insurance if possible, although that represents a big risk. Maybe
a policy with a very high deductible (say $100K) would make sense for
rich people. If one has a mortgage, typically home insurance is
required.