Hurricane Season Raises Insurance Concerns
- Nov 21, 2017
Insurance policies and coverage are a must for home and business owners, especially in high-risk areas where hurricanes regularly sweep through and leave extensive damage behind. Following this year’s massive storms, insurance companies have their work cut out for them as they help clients navigate through the challenges of insurance claims.
Douglas Jones, co-founder & managing partner at JAG Insurance Group, spoke to Multi-Housing News about consumers’ main concerns caused by the 2017 hurricane season, as well as about the impact the new GOP tax plan might have on homeownership.
Following this year’s busy hurricane season, what’s in store for insurance companies and the claims coming their way?
Jones: After many years of relatively calm hurricane seasons, the insurance industry experienced three significant storms making landfall throughout the nation and the Caribbean. Hurricanes Harvey, Irma, and Maria caused enough damage to finally alter the course of the property insurance market as reinsurers will be forced to increase rates for the first time in many years.
What are the most common challenges encountered by South Florida clients?
Jones: The most common challenge will be absorbing commercial property rate increases that customers have disregarded. We have been advising our clients for years to budget in the case that rates will no longer drop 10-15 percent year after year, but few heeded our warning. Now, this unforeseen increase will affect clients and the next step for them is to reevaluate their business to pay for the rising insurance cost.
What are the challenges homeowners face when navigating insurance policies and coverage?
Jones: Consumers learn a lot about their home insurance policies when a storm hits. Unfortunately, most consumers are mainly concerned with price shopping at the time a policy is acquired and ultimately this means “you get what you pay for.” After Irma hit South Florida, most consumers were shocked to find that the damage they suffered fell under their high deductible. This is the same deductible which allowed them to reduce the price of the policy.
Are there any guaranteed procedures to employ in avoiding insurance scams?
Jones: The main insurance scams that consumers should be vigilant of is staying clear of signing an assignment of benefits (AOB). Once signed, an AOB transfers the insurance claim’s rights or benefits of your insurance policy to a third party. Contractors or adjusters may tell you that by signing this document the process will be more efficient, but that’s simply far from the truth. In this situation, prices can double and you will not be able to retract this motion. This issue is a huge factor that has contributed to the high rates homeowners pay in South Florida compared to other areas that are also in high catastrophic risk areas.
How did this year’s storms affect commercial properties and what are your estimates of Florida’s projected recovery process?
Jones: Much like homeowners, the majority of property owners found the damage they suffered falls under their hurricane deductible. Commercial property will, in fact, suffer the highest rate increases we have seen unfold throughout this decade. Some buildings should be carrying higher deductibles to reduce cost based on superior construction and some should be spending as much as possible to lower their deductible.
What is your take on the GOP tax plan and its impact on home and business owners?
Jones: The change would mean increased taxes for affluent mortgage holders everywhere, but packs a particular punch in places like New York, Los Angeles and San Francisco.
How will the proposed limitations on tax deductibles affect homeownership?
Jones: The tax plan has its few perks for the affluent real estate buyer, starting with the consideration of eliminating the estate tax. Children and other heirs left with assets—such as stocks and properties—won’t have to cough up the 40 percent additional tax on these items for much longer.
Although it may seem as if this is only going to strengthen the already super wealthy, this may potentially help middle-class families as well. Parents and guardians will be able to pass along assets to their children without the guilt. Their children will be able to manage assets without additional financial burden over their shoulders.
What is the possible impact the new tax plan may have on the luxury real estate market and new-home purchases?
Jones: Tax incentives to buy could deter individuals from homeownership and push more toward renting. It can also heavily influence the homebuyer’s choice by opting to select a cheaper home to not surpass the maximum capacity. As demand begins to decline, it’s possible that home prices decrease as a result.
Image courtesy of JAG Insurance Group