With insurance claims still flowing in after the one-two punches of Sandy and the recent nor’easter, we checked in with Jay Kay of Stafford Insurance of Fall River, Massachusetts (a BoatingLocal sponsor), to see how the storms might affect insurance premiums in New England. Here’s what Kay had to say:
“Although the storm was devastating, the overall impact on the P&C (property and casualty) insurance industry is predicted to be less than what the public may envision. Up until Sandy, catastrophe losses for the first half of 2012 were well below the first-half average of recent years. Most reinsurers, who really set the tone for rates, reported better than expected earnings for the first half. Keep in mind that insurance, especially re-insurance, is a global market. One catastrophic loss in our region does not necessarily impact local rate setting.
Will rates increase? Most likely they will, but this will be driven by a number of issues besides Sandy, including continued lower investment returns.
Also consider that the vast amount of losses (in terms of dollars) incurred as a result of Sandy were flood-related. Homeowners policies do not cover flood damage, which is provided through FEMA under the National Flood Insurance Program (NFIP). Where we have seen a lot of rate action, and will continue to see much more, is in the NFIP and all of the various private servicing carriers who issue policies for the NFIP under FEMA set flood rates. Plymouth County recently (July 17) enacted the new digital flood maps from FEMA and other local counties will follow in 2013 and 2014. Property owners should all be aware of which flood zone they are in now and how far they are from a higher hazard zone. In Plymouth County—for example Mattapoisett—we saw flood zones move inland 2 to 3 blocks from where they were before July 17. Every bank is watching this closely as they are required by regulation to have their borrowers purchase flood coverage as soon as they are re-mapped into a new flood zone.
The NFIP provides an enticement to property owners to purchase coverage now through both the Preferred Risk Policy (PRP) extension program and zone grandfathering. For the PRP extension, property owners who are not now located in the 100-year flood plain (Zones A and V) can purchase coverage now at very low rates of around $200-$450 a year depending on the limits purchased. Once their town is newly mapped, if they fall into one of these zones they will be allowed to keep that low-priced PRP for at least 2 years. After that, they will move to a standard policy but will retain the rates of the original lower hazard zone. So, even if you are near a stream of brook, it is worth looking into where the closest flood zone is to your house and know when the pending map changes in your county are scheduled for (too late in Plymouth and Norfolk). Public hearings must be held prior to any map changes, so keep an eye on your local media for announcements.
Even if you don’t have a mortgage on your home, be aware that if you ever try to take out a home-equity loan you may have to purchase flood insurance. Better to keep your options open and look into low-cost flood insurance in case your zone changes down the road. Another benefit to consider is that you can transfer ownership of your grandfathered flood policy to a new buyer if you sell your property. In just the past month we have seen 5 flood policy transfers from seller to buyer, which will save each of those buyers anywhere from $1,000 to $5,000 a year in flood premiums. That is quite a selling point.
Boat and yacht rates (and deductibles) may be a different story. But that is a story probably best left for another day.
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