Are you looking for reasons condo association insurance rates are going up foldertips com then read this post this the end.
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What is condo association insurance policy
The best way to safeguard your property and the occupants is with a condo association insurance policy.
In the event that a claim is made against them by someone other than the condo board, condo association insurance is intended to shield its members from potential financial losses.
Liability claims, property damage to the association, and court costs are all typically covered.
This kind of insurance can protect against a range of occurrences, including contract loss, property damage, and bodily harm. Depending on the type of policy purchased, the cost of this coverage will vary, but it is typically quite reasonable.
Condo association insurance is a special kind of insurance that condo associations typically purchase to guard them against potential financial losses brought on by claims made by their residents.
Here are a few causes of the rising rates:
Some residents are curious as to why condo association insurance premiums are rising. The following these factors:
Over the last couple of years, there have been numerous developments in the condo insurance industry. Recent natural catastrophes, the collapse of the Surfside condo, a surge in litigation, and fraud have caused numerous carriers to either withdraw from Florida or impose restrictive exclusions or demand huge premium increases. Sadly, we don’t think that these modifications and rate increases will come to an end in 2021, particularly in the wake of the Surfside crash. Our commercial condo agent and co-owner, Brian Ford, has listed nine reasons condo association insurance rates are going up foldertips com
Reinsurance Rates Go Up
All of the admitted (and a significant portion of the non-admitted) employ reinsurance as a strategy to guard against big wind losses because Florida has the potential for catastrophic hurricanes. Reinsurance is just insurance for insurance firms, to put it simply. The majority of Florida’s admitted property markets, including American Coastal, Avatar, and Heritage, pay an additional fee to “cede” or shift the wind risk to various reinsurers. These rates were extremely low prior to Hurricane Irma in 2017, which allowed the state to avoid 10 years of hurricanes.
However, such rates have considerably increased since Hurricanes Irma (2017), Michael (2018), Sally (2020), and Eta (2020), among other storms. Reinsurance companies cover risks both domestically and internationally, so natural catastrophes like Hurricane Laura in Louisiana, the California wildfires, and the 2020 winter storm in Texas might affect Florida prices. Reinsurance rates have increased between 10 and 25 percent per year in recent years as a result of losses. As a result, when insurance firms must assume a 20% or more increase in the cost of insuring their exposure to hurricane risk, they always attempt to pass that cost on to the insured through rate hikes.
Active hurricane season of 2021
Due to the lack of El Nino and rising Atlantic water temperatures, NOAA and Colorado State University predict that the hurricane season in the Atlantic in 2021 will be “above average.” 17 named storms, 8 hurricanes, and 3 to 4 storms with a Category 3 or higher are all predicted by CSU, according to the report. This affects reinsurance pricing as well.
Collapse of Surfside Condos
Although there is still much conjecture over the cause of the collapse of the Surfside condo and whether or not it would be covered by the Property insurance policy, it has already caused several insurance companies to be more stringent when issuing condos. As a result, several companies have already reduced the age of the structures and roofs they will write about. Additionally, carriers are now requesting more documentation, such as board meeting minutes, financial statements, and inspection reports, before providing coverage. Due to the litigation that will follow, this won’t just be a worry for property insurance; it will also be a concern for general liability, directors & officers, and umbrella liability. As a result, we’ll probably see hikes in most lines of business in the near future.
Increasing Florida Court Cases
Various sources claim that Florida is the location of nearly 3/4 of all property litigation in the US. A 2017 Florida Supreme Court decision in Joyce v. FedNat, which permitted attorneys to employ contingency risk multipliers in the majority of property insurance disputes, contributed to the surge. An attorney makes around 2-2.5 times their regular rates if they are successful in getting a matter to trial (which are already very high). As a result, we have observed that many insurance firms just pay claims that they would have previously been able to defend in court and prevail on. Numerous carriers have chosen not to renew a number of policies as a result of this and the claims frequency problems.
Increasing Claims for Water Damage
We’ve noticed an increase in water damage claims because most condo buildings in Florida, particularly those in Pinellas County, are older. In the past year, I have participated in more than five claims for water damage. All of the claims have been for losses caused by pipes or HVAC problems in structures constructed in the 1980s or earlier.
AmCap, which started out as a division of ASI in St. Petersburg, entered bankruptcy and was placed into receivership in April 2021. Many condo associations in Florida were insured by AmCap, which had an A rating from AM Best before to going bankrupt. They also had a great deal of exposure to Texas and Louisiana, and they had a huge number of claims as a result of Hurricane Laura and the frigid weather in Texas in 2020. Due to their bankruptcy, carriers like American Coastal and Heritage have largely taken over their clientele, which in Florida mainly consisted of newer (2002 or newer) condos. As a result, we are now witnessing a decline in demand from the normal markets for older condo associations.
Age and place
Ratings for seaside condominiums are heavily influenced by their age and location. Many of the condominiums constructed during the 1980s condo boom are now 40 years or older, and this is the point at which plumbing-related problems become more prevalent. Additionally, a lot of insurance companies that still offer policies on older condominiums now want documentation of improvements, particularly for the key systems like the roof, plumbing, and electrical. Since the fall of the Surfside building, this has become more commonplace.
Frequency of Roof & Water Damage Fraud & Claims
In the recent years, contractors have discovered techniques to submit insurance claims falsely and bill insurance companies for astronomically high building claim costs. It was water claims a few years ago, but today it’s roof claims. To encourage consumers to submit insurance claims, contractors have been knocking on doors, posting advertisements on social media sites, erecting yard signs, and more. They would go out in droves to advertise their services if any major storms ever occurred, but when none did, roofers would still go out and say there had been roof damage from Hurricane Irma or another recent storm.
There have been numerous reports of contractors actually damaging roofs to simulate an insurable loss, such as by simulating hail damage with a ballpoint hammer. And they frequently did it on older roofs that were just about to need replacement as a maintenance item. This led to most markets tightening their roof age restrictions (some home carriers now only allowing 5 years for a shingle roof), which contributed to insurance firms posting a $1.6 billion loss in Florida in 2020, a year with few storms. Obviously, this was somewhat more common in single-family homes, but regrettably, the insurance providers for single-family homes and residential condominiums are the same.
Lower Carrier Appetite
All of the aforementioned considerations have caused many carriers, including some Lloyd’s markets, to stop writing properties in Florida or to significantly raise their rates. This is a common occurrence in coastal counties like Pinellas and on the barrier island. And according to basic economics, prices will rise when there are less marketplaces to compete in. We predict that rising condo insurance rates will become the new normal as a result of all these reasons. No board member wants to impose higher premiums on their unit owners, especially given the numerous capital upgrades that are being made. However, since the markets are becoming more competitive, your association’s only option is to get ready for increased rates.
Having said that, now might be a good time to have another knowledgeable agent check the insurance for your association. Though most agents serve comparable clientele, we’ve recently observed a number of associations that weren’t adequately shopped when their contracts were up for renewal and a number of associations that weren’t put with a condo association-specific agency.
For more than 20 years, St. Petersburg, Florida-based Insurance Resources has handled the insurance needs of coastal condo communities. The peculiarities of the Florida market and the carrier landscape are well known to our agents. Please feel free to contact Brian Ford, CPCU, CIC, at firstname.lastname@example.org or 727-345-0242 if your board has any inquiries about your current insurance plan.
Rising claims costs
More extreme weather events, like Hurricanes Harvey and Irma, have resulted in higher claim costs for insurance companies. The policyholders pay higher premiums as a result of these high costs.
New mandates from state insurance regulators
Condo associations must now carry property insurance and comprehensive general liability insurance (CGL), which can increase the cost of the policy.
Changes in state law
Condo associations are now required by many states to carry insurance in case of liability or property damage claims.
Recent court decisions
There is now more litigation against associations as a result of several high-profile court cases that have raised questions about condo residents’ legal rights.
More insurance providers are providing coverage for lawsuits and settlements resulting from association activities, like governing bylaws and member meetings, in addition to property damage.
What you can do to lower your association’s rates
If you own a home, you might be perplexed as to why your association’s fees keep increasing. The truth is that there isn’t much you can do on your own to lower your rate, despite the fact that you might believe there must be something you can do.
Inflation is the primary cause of the rise in association rates. Gasoline and property damage costs have been rising more quickly than the rate at which insurance companies can raise their rates.
It’s crucial to keep track of how much money you’re spending and where it comes from in order to try to stop your association from raising its rates again in the future.
For instance, if you live in a neighborhood where property damage is frequent, be sure to get insurance for both you and your possessions.
How to keep your association rates low
- Ensure the condition of your property. Increased insurance costs may result from poorly maintained buildings.
- Ensure that all of the stairs, windows, and doors are functional. Without proper access, it will be difficult to fix anything that goes wrong on your property.
- Maintain a current inventory of all the equipment on the property. This will assist you in finding any missing parts that might need to be replaced and, if unaccounted for, could result in higher premiums.
- Before you sign on the dotted line, make sure you comprehend all of your policy’s terms and conditions.
Why condo association insurance rates are going up
Several factors account for the rising cost of condo association insurance. The most important factor is that condo associations are now more vulnerable as a result of new risks that have emerged.
One illustration is the rise in the frequency of wind and hail damage. Climate change has increased the frequency of these weather events, which were previously very rare. Condo associations are now more likely to suffer these kinds of losses as a result.
The fact that insurers are becoming more pessimistic in their evaluations is another factor contributing to the rate increases. Instead of assuming that everything will be fine in the event of a loss, they are now more aware of potential problems that might occur.
When everything is taken into account, the rising cost of condo association insurance is not unexpected. Actually, it’s probably a good thing—at least in terms of insurance.
condo association insurance policy benefits
Condo associations are increasingly providing coverage for additional types of property damage, such as theft and vandalism. Because their association is safeguarding their investment, members will feel more at ease.
Associations also provide officers and members with liability insurance. In the event that something unfortunate occurs on the association’s property, this can help shield them from suffering personal injuries or monetary losses.
Numerous organizations provide financial support in the event of a claim. While the investigation is being conducted, this can assist in covering expenses like legal fees and lost rental income.
The primary drivers of rising insurance premiums are the cost of claims, an increase in the building replacement insurance cap, or geographical factors that may affect the likelihood of damage or claims.
The claims are generally self-explanatory and have an impact on the policy premium based on the nature, scope, and frequency of their occurrence. We discuss the subject of losses and claims in this section because it is a pretty large topic that calls for further considerations.
Many policies have an inflation guard clause that specifies how much the insurance limit will increase over the designated time period, usually upon policy renewal. This prevents the property from being underinsured and helps the insurers keep up with the escalating expenses of labour and construction. The cost of the insurance increases in line with any increases in the cost of replacing the building. When the building limit of insurance is insufficient to cover losses in the event of a catastrophic risk like fire, the insurer may discover that these expenses have increased more than the inflation guard allows. In that situation, the insurer may suggest a sufficient insurance limit at the time of policy renewal along with a modified policy rate.
The third most frequent factor driving up HOA insurance premiums is the occurrence of more frequent and extensive weather abnormalities. In recent years, more and more places have become vulnerable to sudden and severe weather anomalies, such as wildfires in California, hailstorms with baseball-sized hail in parts of Colorado, and extended hurricane seasons, which in 2020 saw a record-breaking 10 named storms, resulting in record-breaking $26B in damages. This has a significant impact on how insurers assess risks, leading to higher premiums in places vulnerable to weather-related disasters.