| FIRE
FALLOUT
Insurance claims are being received by the thousands involving homes, autos, business and life. Currently, losses are being calculated and reserves set up by the various insurance companies that have interests in the affected areas. With a loss of such magnitude, financial resources of the insurance industry will be stretched thin. Who will pay? The various insurance companies that have policies covering the affected properties, right? Wrong! At this time I would like to review the concept of insurance and the impact that this past event will have on all of us. I cannot tell you how many times I have talked with prospective clients that have had no claims who complain of the outlandish insurance premiums that he or she has to pay. Unfortunately, the concept of insurance is shared loss. It is obvious that for most of us, we are unable to meet the financial requirements set by both the state and or federal governments in the event of a loss. Included in this is the loss to our property, equipment or load. You may not have had a loss, but someday, in some way, you most likely will. Losses happen – that’s just a fact of life. I have insured’s that have never had a loss and others, well, their extensive claims history continues to grow. Of course, all of us will pay, that’s the concept. The risk is spread throughout the insurer’s book of business. With all of this I would like to give you a very brief look at some numbers. These are in no way official numbers of the tragic aftermath of the 2003 fires, but a simple calculation done at my desk. Reports are that over 2,800 homes were lost (I am keeping my figures to homes, excluding any other property involved). If the average home loss was valued at $200,000, the total to the insurance company, in each case, could be as high as $360,000. This figure is based on a total loss, which would include contents, other structures and loss of use. Using this as an average, with approximately 2,800 homes lost, the total insured loss would be over one billion dollars. Nothing else has been taken into consideration at this time. If the average home value was $400,000, the figures would double. Going back to our $200,000 home value, the following rough values are given to impress upon you the magnitude and financial depth of the catastrophe. If the average insurance premium was $600, the annual premium generated from these 2,800 would be only $1,680,000. It would take a staggering 60 years to recover from this loss if no other losses were ever received. This is why insurance is based on the "shared loss" concept. I listen every day, over and over, on how the insurance industry rapes the consumer. Insurance companies have to make money, providing financial strength to pay for those unfortunate losses that happen. Minor losses, catastrophic losses (such as 9/11) and endless natural disasters that this country endures each year, have to be anticipated and prepared for. We have created the insurance industry by necessity and through legislation to provide us with certain indemnifications. These coverages provide us with protection from 3rd party claims, loss of property, bodily injury, business losses, life and health, to name a few. We expect, as a nation, to be compensated for loss. Insurance is the intermediary that collects and administers those losses that affect our everyday lives. Insurance is an integral part of the economic system that provides for our way of life. Roland Enz can be reached for comment
or information through California Plus Insurance Service, Inc. by
calling toll free 1-800-699-7101. |