Monday, January 22, 2007

Insurance Companies Refuse to Insure against Risk

Not even wealthy New Englanders safe:
During the nine years she's lived in her historic sea captain's house on Cape Cod, Mass., Paula Aschettino never filed a claim against her homeowner's insurance policy. But last year she received a letter from her insurer, Hingham Mutual Group, canceling coverage on her nine-room, $600,000 oceanfront home, which has withstood its share of hurricanes since 1840. She and her husband, Michael, scrambled to find other insurance but were repeatedly denied. "They just said we are in a high-risk area," she says.


Allstate Insurance recently announced it wouldn't take new homeowner policies in New Jersey, Connecticut and Delaware—or the five boroughs of New York City. The company also won't renew 30,000 of more than 600,000 policies it carries in and around New York City. A host of other firms are refusing to insure properties along the Atlantic coast from Maine to the Carolinas.
Now, the greatest statement ever by a spokesperson for an insurance company, which exists for the purpose of insuring against the various things that could go wrong in life, i.e. “risk”:
"We believe it would be bad business to continue to add to our risk."
I think someone is in the wrong business.


chris said...

Insurance companies aren't in the business of risk. They are in the business of profit, and they don;t deny it.

Marco said...

My cousin works for Chubb in New England. They're doing the same thing. You don't see many insurance companies going out of business though.

da po' boy said...

True on the business part, and the not denying it part.

I hold firm to the belief that "businesses," "employment," or "jobs" exist to provide a service that a community needs. Money, or profit, is compensation for providing that service.

Profit is never, in my crazy world, a sole reason for a business to exist. I judge the worth of a business, including the one I work at, by how well it serves its community, not by how much profit it makes.

The need for insurance predated the insurance industry. The insurance industry evolved to meet that need. It made a lot of money off of meeting that need.

Now, as in the case of the 1840 Cape Cod mansion, the insurance insustry has decided that it exists not to provide a service where it has been needed for a long time, but exists to make money.

I just don't think any community can function well or fairly for all its members using that business model.

da po' boy said...

You don't see many insurance companies going out of business though.

Interestingly true. They (as an industry) made high profits in 2005 (despite Katrina and Rita) and 2006. I readily admit that I do not understand how the insurance industry works.

Sophmom said...

Maybe something will be done about it now that the NE coastline and Manhattan are in the highest risk uninsurable equation. So are they not going to insure their own offices?

Like the pharmaceutical industry, they spend a lot of time crying about how expensive it is to operate while singing all the way to the bank.

Slate said...

Da Po,
You oughtta make that comment a post in and of itself. That's exactly my view, so I must be a resident of your crazy world. You put it very succinctly.

Patrick Armstrong said...

Yeah, insurance companies are in business, but the coastal areas of the nation include some of the most economically important and profit producing zip codes in the world. What are they going to do, not insure New York City? The state of Florida?

What they're waiting on, and what they are lobbying for, is government disaster funding, like what Florida created after Andrew in 1992. That's government insurance for insurance companies, meaning those companies who make profit (and a lot of it) based off risk, will be able to pass the burden off on the taxpayer if that risk should be called due.

Not that a government disaster fund is a bad idea for any (especially coastal) state...but when government makes laws requiring the purchase of insurance policies to secure loans for home & auto ownership, and then collects tax dollars to make sure those insurance companies aren't actually taking any risk, well that's not a profit making business, that's a privatized IRS and a double hit on the taxpayer's wallet. At that point, why not just nationalize all insurance companies anyway, because all the risk is already shared by the taxpayer.

One day soon, someone will realize this, and create an insurance co-op where the 'shareholders' are the policy holders themselves, and the company exists solely to make profit to lower premiums and increase payouts for disaster.