[TowerTalk] lightning vs insurance

[Jim Lux]

At 01:38 PM 1/5/2007, Trent and Lorraine wrote:
>Greetings All
>
>As insurance brokers here in VK www.sampson.net.au  I am quite amazed at the
>cost of the Florida premiums, a standard policy that covers towers and
>related damage and liability up to $20M and the home (say$350,000) and Tax
>Audit insurance ($20K) and cover for board member of non profit
>organisations e.g. Radio Club is under $1000 AUD..

I'd venture to say that there's a few reasons for that.
1) In the U.S., insurance company profits (and their management) are 
driven more by investment returns in the stock market than from the 
traditional difference between premiums received and claims 
paid.  This can lead to some weird things (charge abnormally low 
premiums, because you can invest the money and get the overall return 
high enough to pay the claims, sometime later).  This is what has 
happened in California several times, particularly with things like 
Worker's Comp. Competition caused companies to offer rates that were 
too low (based on expected claims and probability of occurance) but 
they could get away with it because they made their money on 
investing the premiums.  When the market went south, they didn't have 
the cash to cover the claims, so drastically raised premiums, or 
where regulation prevents that, left the market, praying for no big 
disasters.

2) Hungry plaintiff attorneys are thicker upon the ground here, and 
the culture of civil settlements means that you can make a fair 
amount of money suing and settling, without ever having to actually 
worry about the merits of the claim.  This leads to justly deserving 
claimants not getting what they deserve, and spurious claimants 
getting what they don't.  I think that this actually isn't a big 
dollar item, but it leads to a lot of unnecessarily conservative 
underwriting, which then reduces the size of the risk pool.  The mold 
issue might be a good example. Paranoia about getting whacked for a 
mold claim makes insurers leery of insuring anyone who's ever had 
water damage.  I suspect that civil liability case law is radically 
different in VK land.

3) A focus on short term bottom line for the insurers leads to 
writing lots of policies in rapidly growing areas (boosting premium 
income) that happen to be geographically bad (beach front property) 
and with rapidly increasing values (making the payout on a 
replacement cost policy way out of proportion to the premiums 
paid).  There's no real "spreading of the risk".  But, hey, this 
quarter's profit numbers look real good in the mean time.

Jim