Severe Weather Has Home Insurers Rethinking Coverage

The April 2012 edition of InsuranceJournal.com notes that, as weather disasters occur more frequently, homeowners are often hit with the unexpected loss of homeowners insurance policies as insurers re-evaluate their financial liabilities.

Michael Barry of the Insurance Information Institute notes that 2011 was an extraordinary year for natural disasters which caused insurers to assess whether they are able to absorb severe losses. Some insurance companies have pulled out of “weather-challenged” states, declining to write new homeowners policies and, in some cases, renew contracts with current policyholders. For example, in the wake of Hurricane Irene, Allstate informed approximately 45,000 North Carolina policyholders that it would not renew contracts that were not bundled with auto insurance.

Some organizations, such as the Consumer Federation, have argued that insurers have “hollowed out” the catastrophe coverage by raising deductibles, capping replacement costs, and removing coverage for wind damage if another non-covered event such as a flood also occurs. The industry contests this assertion, noting that it has paid out billions of dollars to millions of customers affected by natural disasters.