Fingers in the Cookie Jar...
by John Occhi, Hemet REALTOR

Have you heard the word as to what is likely to happen to your homeowners insurance?  That's right the rates are going down and that has to be reason to celebrate.

The California Insurance Commissioner, John Garamendi will be our new Lieutenant Governor when he is sworn in on January 7^th.  I wish him well and hope he has as much success as he has in the Insurance Commissioner position that he has held for some time,

As Insurance Commissioner he put the pressure on the big companies.  If you are insured with either Farmers, State Farm, Safeco, Hartford , USAA, Nationwide or Kemper you should see about an 18% drop in your rates, which are expected to take affect in June 2007.

Other rates will take effect as well.  For example, with Farmers Insurance, if you have a dual policy - meaning you have both your auto and your homeowners insurance you will receive a bigger discount than you already do.  That's right, the discount will go from 12% to 15%.  Check this out.  If you go 6 years without a claim, Farmers will offer you a special ‘claim forgiveness policy'.  I'm not sure about the details of this one - but it does sound good, doesn't it?

The reason for this good news...well it turns out these ‘big insurance companies' have been paying out less than 50% of each premium dollar they collect.  Mr. Garamendi commissioned a 13 page study called "Lower Claims, Higher Profits:  Where do Your Premium Dollars Go?  It is available here as a PDF document, if you want a copy for yourself.  (in case of a broken link - the actual URL will be found at the end of this article.)

This study found that both homeowners and auto insurers experienced historically low loss ratios for the last two years (2004-2005).  The study reports that Allstate only paid out 41% of their collected premiums ; Farmers only paid out 37.7%; and Safeco barely paid out ¼ of what they collected, or 26.3%.

The argument the insurance companies make is that they have to keep a large reserve for future disasters and need to continue to build these reserves and maintain surplus money supplies..  Mr. Garamendi won with his strong argument that the insurance companies have very strung financial reserves.

For example, in 2003, State Farm actually paid our 104.9% of its collected premiums to settle claims and yet they still posted a profit.  It seems their ‘reserves' and ‘surplus' bring in a nice profit form their investments.  In 2004, State Farm kept 68% of their collected premiums and in 2005 is was only 62.4%.

Have a Blessed Day,

John Occhi, Hemet Realtor
http://www.johnocchi.com/

Here is the link to the report commissioned by the California Department of Insurance, dated May, 2006:
Insurance http://www.insurance.ca.gov/0400-news/0100-press-releases/0070-2006/upload/Lowerclaimshigherprofitsreport.pdf