The Panic Over Skyrocketing Premiums

For years, residents of coastal areas within the U.S. have been paying relatively little in flood insurance premiums, considering the catastrophic nature of the threat they face. The low premium rates were partly due to the federal government’s subsidizing of this type of insurance, through the National Flood Insurance Program.

Since Hurricane Sandy and the extreme financial losses it caused, there has been a reevaluation of the system. Last year, Congress passed the Biggert-Waters Flood Insurance Reform Act. The bill will, in incremental stages, remove government subsidies that have historically kept flood insurance premiums artificially low for over a million policyholders nationwide.

Why Your Insurance Premiums Are Getting Pricier and What You Can Do About It

Many clients are dismayed by the rising costs of their insurance coverage. A common question I am asked is:

“If I didn’t file a single claim this year, why would my insurance company raise my rates?”

There is no one answer to this relevant question. Many factors go into determining how much insurance companies charge for coverage. Like other markets, the global insurance market is cyclical and alternates between periods known as soft and hard markets.