What’s up with Insurance Costs?
This is the biggest question today market place from Homeowners, Contractors, and the Professional Industry. How could two buildings that were insured cause this type of financial damage to the insurance market?
Like any product it starts with the company offering materials to a manufacture. The reinsurance company’s have a large investment fund available for insurance company’s to purchase from. The reinsurance company will dictate the type of liability risks unable to obtain their reinsurance and what price their reinsurance will cost the insurance company. The insurance company in turn must make a profit and decides what type of business they are willing to offer coverage to and at what price. The terms and pricing is offered to wholesale agents and/or retail agent which is then sold to the public.
With the twin towers, the damage did not stop with just the buildings going down. The damage to the building, the buildings around the towers, damage for injury, damage to each business which leased from the towers, investigation costs, clean up costs and so more. This cost was transferred to the insurance company and the reinsurance companies. This amount of devastation could not have been predicted. The stock market was having issues prior to 9-11 and continued to be felt by all insurance stocks.
In order for any company to stay in business, the cost of their products will be adjusted to ensure a profit and the stockholders are happy. Selecting a specific product or client which is likely to ensure profit will strengthen the performance of a business. Liability, Professional and Umbrella policies have had their product cost increased to ensure limits are available to pay a claim and keep the stockholders happy.
Last revised: Date 04/30/2008