
Insurers poised to raise prices after costly string of natural disasters - kimsk112
https://www.wsj.com/articles/insurers-poised-to-raise-prices-after-costly-string-of-natural-disasters-1514462400
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oarla
I've always wondered this about insurance company's business model. How is it
fair or legal for them to pass on the increased costs to their customers?
Providing insurance is a risk that companies take, for which they get rewarded
if there is more inflow of cash (premium) vs outflow (payouts). If they have a
bad year where more customers are to be paid out, then how can they increase
the premium on everyone, just to ensure that their profits grow or remain
same?

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thisisit
They cannot change the terms of existing insurance contracts. The increased
prices will show up on new contracts - either renewal or entirely new
properties.

That said, as the article notes:

> There is some skepticism that reinsurance prices can rise enough in the
> coming year to offset the decline over the last decade. Any changes may also
> take some time to flow through the industry. In Florida, one state tested by
> this year’s events, many insurers won’t renew their reinsurance policies
> until June.

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neonate
[http://archive.is/S4qHs](http://archive.is/S4qHs)

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gruez
aren't insurance rates supposed to be based on risk? so unless the recent
string of natural disasters increased the risk (or revealed increased risk) of
future disasters, they shouldn't raise rates. or did the reinsurers want to
recoup some of that lost money?

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RA_Fisher
Disasters essentially provide information that lets insurers price risk.
Inflation is their chief enemy. During times without events they do bank for
payout. When an event happens often risk is better understood and policies
might be renegotiated after a disaster a la Katrina on offshore oil and gas.
It happens through groups of "syndicates" at Loyds of London - basically
actuaries with capital.

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gruez
if disasters provide information about risk, then the lack of disasters should
also provide information. which means that insurance premiums should be
steadily decreasing in years where there aren't many payouts. does this happen
in practice? feels like insurance premiums only ratchet up (at least on a
personal level).

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RA_Fisher
It doesn't really at least not for my house, haha! I think it might be related
to inflation so that in real terms it really does fall.

