Insurance reality check

Started by BryonW • 14 replies • 262 views

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BryonW (Massachusetts)
Posts: 55

Posted:

During our most recent insurance renewal, the insurance agent told us that it is NOT in the association's best interest to shop around for multiple insurance quotes. Instead he suggested that we just renew with our current carrier.

Naturally, my first reaction is that he is just making up BS, because he is a commission salesperson, and he wants to avoid losing our account to a competitor.

However, he gave some detailed reasons, which seem plausible. Wondering what folks here think of his given reasons... BS or valid?

1) Loss ratio: the more years you are with a single underwriter, the more your total lifetime premiums you have paid to that carrier, and then if you have a claim, your loss ration as a % will be lower. Example:
Association's premium is $30,000/year. Have been with the same carrier for 5 years, so total premiums paid = 30,000 x 5 = $150,000. Then if the association has a $50,000 claim, the loss ration is $50,000 / $150,000 = 33%.
Compared to a scenario where you have the same claim, but, have only been with your carrier for 1 year. Now loss ratio is $50,000 / $30,000 = 166%. And you are likely to get non-renewed because that ratio is too high.

2) Less likely to quote: when an underwriter sees an account that has changed frequently, it goes to the bottom of their pile, and the association runs a risk of not getting any quote at all.

3) He says that accounts who have been with 1 underwriter for many years get better rates than accounts that are new.

Thanks for any insight!

TimB4 (Tennessee)
Posts: 21,062

Posted:

Shopping for multiple quotes is not the same as changing insurance companies.

I would shop for quotes simply to see if what I was being charged was the going market rate (once adjustments are made as needed to compare apples to apples) or if I'm being charged more than the going rate.

Reasons your agent gave you should be considered when choosing what company to go with.

last year our Association solicited quotes and discovered that we had a darn good rate.
The quotes also gave the board good information to answer any questions about the cost of insurance from the membership.

MarkM19 (Texas)
Posts: 1,459

Posted:

Bryon,
It is hard to tell if you are being given good advice or a sales pitch because his rates are high.

This is going back about 16 years when I was looking at our policy in Ca. We were paying 25K for 438 SFH HOA with 3 buildings and a pool. I told our PM that I would like to get 3 quotes for the same coverage. He quickly told me that we are getting the best deal in town and this broker does All of their HOAs. This was the top PMC in the US at the time. I told him that we need the bids and let's see just how much he is saving us. When the broker got back to us, he said rates had recently dropped and our new policy would only be 15K. An amazing 10K savings and I can only imagine everyone of this major PMC was also getting screwed by this broker. If you notice I keep saying Broker. They are not tied to one carrier in most cases, and they should be able to check carriers without any red flags. The only problem I see changing companies could happen is if you have a freak accident or claim in your first year you may get dropped which can be bad.

ElleN (Idaho)
Posts: 1,338

Posted:

Quote:

Posted By BryonW on 04/19/2025 12:29 PM
During our most recent insurance renewal, the insurance agent told us that it is NOT in the association's best interest to shop around for multiple insurance quotes. Instead he suggested that we just renew with our current carrier.

Naturally, my first reaction is that he is just making up BS, because he is a commission salesperson, and he wants to avoid losing our account to a competitor.

However, he gave some detailed reasons, which seem plausible. Wondering what folks here think of his given reasons... BS or valid?

1) Loss ratio: the more years you are with a single underwriter, the more your total lifetime premiums you have paid to that carrier, and then if you have a claim, your loss ration as a % will be lower. Example:
Association's premium is $30,000/year. Have been with the same carrier for 5 years, so total premiums paid = 30,000 x 5 = $150,000. Then if the association has a $50,000 claim, the loss ration is $50,000 / $150,000 = 33%.
Compared to a scenario where you have the same claim, but, have only been with your carrier for 1 year. Now loss ratio is $50,000 / $30,000 = 166%. And you are likely to get non-renewed because that ratio is too high.

I was curious and googled. The internet seems to support that a high loss ratio (for a client's entire past history of premiums and claims) may lead to non-renewal.

This is what I put into google's search window:

"loss ratio" "insurance" "high" "non-renewal"

ElleN (Idaho)
Posts: 1,338

Posted:

Google AI response, first paragraph, to "is a low loss ratio a good reason not to change insurers?"

A low loss ratio, while seemingly positive for an insurer, might not be a definitive reason not to switch insurers. While low loss ratios can indicate good financial health and lower premiums for the consumer, it could also suggest unfair claim denials or inadequate coverage. It's crucial to consider a holistic view, including claim handling practices, policy terms, and customer service before making a decision.

Great anecdote from MarkM19's HOA history.

DeanJ
Posts: 1,786

Posted:

Quote:

In the current market for condominium insurance, I believe your brokers advice is valid.

The universe of companies issuing condo policies is shrinking and if you have a good company you are probably best served by sticking with them. The rates are going to be higher than you would like to pay everywhere and I doubt there is significant difference in premiums.

MarkM19 (Texas)
Posts: 1,459

Posted:

Dean,
While you are correct for the most part no one knows how good the insurance is until a claim is filed. They cash the check annually and are happy to do it. Once a claim comes in front of them you find out what you have been paying for all those years.

I always advise my HOA to use high deductibles and take whatever rate savings you may get, and it can be considerable in a separate insurance account. Many HOAs never file a claim and have very low deductibles. Insurance is for emergencies and high dollar claims IMO.

JackS20 (North Carolina)
Posts: 271

Posted:

We've never used insurance in 25+ years at our SFH HOA. One board member a couple years back wanted to make a claim over a $300 flower bed that a car ran over. The deductible is $1000. This is how cluless people are sometimes.

Whenever I shop around all that competitors look for is 5 years of no or low claims. I doubt they credit you more if you had 30 years of non claims.

Shop around and raise your deductible.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By MarkM19 on 04/19/2025 5:06 PM
Dean,
While you are correct for the most part no one knows how good the insurance is until a claim is filed. They cash the check annually and are happy to do it. Once a claim comes in front of them you find out what you have been paying for all those years.

I always advise my HOA to use high deductibles and take whatever rate savings you may get, and it can be considerable in a separate insurance account. Many HOAs never file a claim and have very low deductibles. Insurance is for emergencies and high dollar claims IMO.

The purpose of insurance is to protect the owners investment from loss. Do you advise your HOA that the high deductible you are recommending applies to each and every claim made by the HOA and carries multiple claim risks. It’s totally possible after paying a large deductible for storm damage, your HOA could be paying another large deductible for a second storm.

Most HOAs struggle with reserve maintenance accounts and their CC&Rs do not provide for an insurance deductible account. If you have to levy a $2,000 special assessment, your owners really aren’t going to care how much you saved on the premium.

MarkM19 (Texas)
Posts: 1,459

Posted:

Dean,
What I was trying to say is insurance is not for a 5 to 10k claim in most cases. And if you have a second claim of similar costs soon after you are almost guaranteed to be cancelled. They use actuarial tables that clearly state your HOA is a bad risk and will probably file a third claim soon.

No one likes special assessments and that is not what I am recommending. I am saying avoid claim at all costs. Carriers get their money back from claims through higher premiums and raised rates. That is why their names are on many of the big building in every town.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By MarkM19 on 04/20/2025 7:49 AM
Dean,
What I was trying to say is insurance is not for a 5 to 10k claim in most cases. And if you have a second claim of similar costs soon after you are almost guaranteed to be cancelled. They use actuarial tables that clearly state your HOA is a bad risk and will probably file a third claim soon.

No one likes special assessments and that is not what I am recommending. I am saying avoid claim at all costs. Carriers get their money back from claims through higher premiums and raised rates. That is why their names are on many of the big building in every town.

In todays world, $10,000 is not a high deductible policy.

JeffT2 (Iowa)
Posts: 880

Posted:

suggestions:

1. Do everything you can to avoid claims. Raise the deductible, strengthen your rules for greater safety, and take complete charge of any claim to reduce the costs (ideally get the cost of the repair to be less than the deductible).

2. Advise your owners to add coverage on their insurance policies for "loss assessment" that will reimburse them for the cost of a special assessment.

3. put aside some money for a deductible.

I wish the insurance companies would give better suggestions.

BryonW (Massachusetts)
Posts: 55

Posted:

Awesome, thanks all for the responses.

Overall my take-away is that the brokers reasons should not stop us from getting competitive quotes. We should do that on the next renewal, just to keep the broker honest, and provide reassurance to the owners that the price is fair. If the current broker continues to dig in heels and refuse, then, we we will bring in a second broker.

If the quotes found another price that is only slightly lower than our current, then, we might stick with our current carrier, based on brokers "reason #1, loss ratio", which could be a valid concern.

But if another carrier provided a significant lower cost, we would probably switch, reasoning that because claims are so infrequent, the chance of a large claim during our first year with a new carrier is low. (for our association, there have been no claims for as long as any current board member can remember - at least 10 years)

Speaking of deductible - we are currently at $10,000 and considering an increase to $20,000 next year. Our master policy is all-in, so very comprehensive. The deductible in per unit. Individual unit owners are strongly advised to buy an HO-6 policy that covers them up to the master policy deductible.

TimB4 (Tennessee)
Posts: 21,062

Posted:

I would check to see what the expense would be for you to purchase HO-6 for that amount. That way, you can determine if it would be worth changing the deductible cost wise for the individual owner.

BryonW (Massachusetts)
Posts: 55

Posted:

Hey TimB4, yes that’s what we are doing. The analysis is:

If a unit owner’s individual insurance (HO-6) will increase by $50/year with the new higher limit, and their beneficial interest is 2%, then the break-even is $50 / 0.02 = $2,500.00 (meaning, the savings on the master policy must be $2500 or greater to make the switch worth it)

And we are having several unit owners all get quotes at the higher deductible, then averaging out all of the resulting break-even prices.

We are doing this shopping right now, so that when our next master policy renewal comes around, we will be ready to make a quick go/no-go decision.

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