With insurance companies, what’s the difference between storms, wildfires, and crime? If your home or business is broken into, or if you are injured during a crime at home, or if your car is stolen, there’s little difference.
An insurance company sees a risk as undesirable regardless of the reason. It may affect crime reporting.
Question: Can you lose your home, business, or car insurance because of crime? I would have thought it was a silly question until I moved to a coastal area of Florida.
In Florida, insurance rates are going through the roof due to storms. It’s creating a housing crisis where people are leaving the state’s coastal areas because they can’t afford the vast insurance increases. It’s especially difficult for South Florida condo owners who are also being hit with huge special assessments to repair their buildings after a condo collapsed causing multiple deaths.
It’s happening in all coastal areas of the country from Texas to the northeast. It’s happening in the west due to wildfires. It’s happening in the Midwest because of tornados.
The bottom line is that people who cannot obtain insurance often go without or move or they use that state’s government insurer of last resort. If a disaster hits, it could swamp the state financially.
It’s Now Happening Because Of Crime
If you do not live in the areas affected by extreme weather, you may not be aware of the insurance challenges to housing markets, businesses, and the overall economy. In essence, insurance companies are dropping “iffy” properties by the tens of thousands or insisting that they storm-proof their structures causing thousands to make very costly repairs.
But what’s the difference between storms, wildfires, and crime? If your home or business is broken into, or if you are injured during a crime at home, or if your car is stolen, there’s little difference. An insurance company sees a risk as undesirable regardless of the reason.
Insurance companies are using algorithms for either event. If you live in an area with a high probability of storm damage, your premiums will increase.
If you live or have a business in an area with a high statistical probability of crime, your insurance premiums will increase.
It’s already happening for your car or truck.”Increased crime rates are going to translate to [paying] a higher premium for your vehicle,” NICB (National Insurance Crime Bureau) President and CEO David Glawe said.
But increasing premiums may be the tip of the iceberg. You may be required to target-harden your home or business against burglaries and other forms of crime. It’s happening to businesses and homes because of storms. Why wouldn’t it happen because of crime?
But like the story below from the San Francisco Chronicle, you, your home, or your business could be dropped altogether because of crime. There are many reasons for not reporting crime and rising insurance premiums could quickly become one of many.
Our insurance agent in Florida warns us not to report storm damage unless it’s substantial. Why wouldn’t the same thought apply to crime? Why call the cops or your insurance company if it’s going to result in higher insurance costs forever?
What Could Happen?
Once insurance premiums rise beyond what’s affordable, you stop paying. Communities lose homes. Businesses leaving communities because of crime and increasing costs degrade neighborhoods. The value of your house or business declines.
So crime becomes more than just a statistic. It can dramatically change your life or your finances. It can dramatically change the very nature of communities.
San Francisco Chronicle
Insurance crisis hits Bay Area businesses, with some dropped over ‘crime scores’
Nenna Jenner thought she had a good deal. Jenner, owner of downtown Oakland bar Feelmore Social, signed on last year for business insurance for $654 per month. The plan covered security risks, workers’ compensation, and liquor liability.
But this spring Jenner’s coverage was canceled, and she was forced to switch to multiple carriers, stitching their policies together for a comprehensive plan. She’s now paying a combined total of around $1,000 per month — about a 50% increase.
The reason Jenner was dropped, she was told, is that the 94612 zip code that includes her business has a high crime score — despite Feelmore Social itself experiencing no crime incidents.
Jenner is far from alone. A half-dozen small business owners and insurance experts told the Chronicle that insurance rate increases, dropped coverage and fewer options are now common for small businesses. In many cases, the owners have not filed any claims but have still seen rates go up.
“Crime, theft, vandalism — those costs are all going up. … We’re seeing inflation. The cost of insurance reacts to the rest of the economy.”
Decante SF, a wine bar in South of Market, had to switch insurers twice in the past two years. Costs have increased by $2,000 to $4,000 per year.
“It’s been really, really difficult,” said co-owner Simi Grewal. “I think there are just fewer carriers that want to operate with bars and restaurants.” Last month her business was robbed twice in two days.
A local small business owner is losing his insurance policy after three years of “unfavorable loss” due to claims made after tens of thousands of dollars in damages due to the crime crisis. In protest, he exclusively told “The Jason Rantz Show” on KTTH that he won’t collect taxes for Washington unless he’s able to find an insurance company willing to cover his business.
Nirav Sheth owns four brick-and-mortar small businesses across the Puget Sound region. He said the vandalism and break-ins are constant, forcing him to submit insurance claims to help cover the surging costs of repair.
Conclusions
First, the cited articles focus on businesses and vehicles, not homes. But the leap to residences seems inevitable. “If your home is in an area that has high crime rates, you may also see higher premiums.”
People seem to have a rather simple solution to crime; they move or target harden their homes, businesses, or vehicles.
But if a section of a metropolitan area has high rates of crime and, concurrently, high rates of crime-related insurance, or homes or businesses that are uninsurable, then everyone’s property values decrease.
If businesses, restaurants, or bars shut down because of a lack of crime-related insurance, it hurts the overall ambiance of the community.
Rising insurance policies or dropped businesses or homes because of crime can have a major impact on the livability of a community or city.
When insurance rates started climbing because of storms in coastal areas many years ago, people thought it was temporary. Today, we’re finding out that it’s not. It could be the same for crime. If increasing premiums apply to cars and businesses, they will apply to homes.
And you could (will?) pay the costs in more ways them you imagined.
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