nevertheless the premiums MUST cover all costs and some profits so the business can remain in operation. lets not forget theres probably a LOT of overhead running a insurance companies, agents fees, commisions, underwriters, investigators to find fraud, let alone inspecting and managing repairs so people cant steal by covering stuff up.
anyone who has had a claim knows what a hassle between contractors, insurance company and mortage company...........
now most probably SHOP for lower cost coverage, who volunteers to pay more to cover fires and perhaps shock hazards from old obsolete K&T wiring:(
You see Haller, what dpb, myself and others are unsuccessfully trying to impress upon you, is that YOU shouldn't make blanket statements like "Sate farm will NEVER insure a home purchased today with K&T I asked my agent.........."
The latest statistics I have say that of 100 homeowners, one will have a total loss over 20 years. So yes, total losses are a very infrequent risk.
But they're also only a very small part of what insurance ends up paying for -- there are a lot of $1000 burglary claims and $10000 kitchen fires for every total loss, and they come out of the same premium pool as total losses.
If an insurance company can identify particular classes of homes that are more likely to have losses, and if their actuaries can develop reliable estimates of the extra risk, they can implement appropriate surcharges so that lower-risk policyholders aren't subsidising higher- risk policyholders.
If the insurance company can identify hazards that increase risk, but can't come up with reliable actuarial estimates of the risk, then it's hard to develop an appropriate surcharge and get it approved by insurance regulators. That's where the company tends to either decline to insure that type of risk or accept it without a surcharge.
I just gave them 100% over a claim and showed on that basis using your postulated numbers it only takes an annual claims rate less than otoo
0.1% to make it up. Double or triple that and actual experience is still far below that level, I am certain for individual losses.
...
Well, my experience has been pretty much the direct opposite -- I have had claims paid promptly, fairly, and all dealings have been very professionally managed. I think it has more to do with making a selection of an insurer with a good reputation than anything else. Of course, I've not had a complete loss (thank goodness) but I really have no qualms that if I did the resulting angst would be compounded by the insurance company who underwrites our coverage.
We have been through sizable losses owing to storm damage over the last several years in this small city where two years running small tornadoes and major hail storms required over 80% of all roofs in the entire town to be replaced along with sizable other wind-related damage to the extent of several homes and businesses were completely totalled. In the ensuing aftermath of the several boards I sit on, losses for their facilities were as high as in the $100k range and up each year and we had _no_ difficulties whatsoever with any of them. Of all the stories in town, I am only aware of one particular contracted adjusting firm that was initially very penurious in their evaluations and invoked the ire of many who had their coverage from the firm which hired this particular adjusting firm. After several complaints to the local agent and confirmation by him that the adjustments did not seem in line with actual damages and others, this firm was replaced by the underwriter and each case revisited. I am sure there were a few cases that were not settled to the complete satisfaction of the homeowners as is inevitable, but certainly, overall, the situation was handled quite as well as could be expected.
Well, as was noted in a thread in one of your previous jousting bees on the subject, there is little definitive data that really proves conclusively that K&T _by itself_ really raises the risk that much. So, overall, it is highly doubtful K&T is raising your rates very much as compared to other factors. If you're concerned that it is, then I suggest you continue to shop for the underwriters who _do_ proscribe against it (if you can find any) and their rates should reflect their improved actuarial experience and be lower than their competitors to account for it.
If your actuaries have a good handle on the added risk a repeat-DUI customer represents, and your insurance commissioner will approve appropriate surcharges, you insure the repeat-DUI customer because he's likely to be just as profitable at very high premiums as a safe driver at very low premiums.
Nobody has been suggesting misrepresentation or concealment.
But in many parts of the country, many insurance companies don't even
*ask* about K&T wiring. They may ask a more general question, like "is any part of the wiring obviously indadequate or in need of replacement?" They may ask whether the home has fuses or a breaker panel.
Why would they do that? Various reasons.
If a large share of local housing stock still has some K&T circuits, refusing to insure them would cost the company more business than simply charging a premium that includes the slightly higher risk.
The average homeowner is not an electrician and can't be expected to know much about the home's wiring, especially what's inside the walls. Asking them about K&T wiring wouldn't necessarily get useful information.
If the company does interior inspections on older homes, the inspector is likely to be a more reliable source of information than the customer.
My own homeowner's insurance application *did not ask about K&T at all.* The interior inspection was ordered based on the age of the home, the inspector looked over the wiring, checked what loads were on what circuits, looked for signs of overheating in outlets and the panel, etc. The company approved the insurance based on the application and inspection.
If the inspector missed some awful wiring flaw that causes a fire, there's no basis for denying a claim -- I fully answered all their questions, they took advantage of their opportunity to inspect the risk, they decided to accept the risk.
Precisely, and well put. I would have thought the 1 loss/2,000 homeowner-years still somewhat high, but certainly in the realm of reality. I was only doing the pseudo-actuarial excercise to demonstrate that while speaking of $100-200k losses sounds absolutely huge, when spread over the risk pool, there's a lot of revenue providers who don't have the claims to make up for it. And, granted, there are many more smaller claims than total losses, but hallerb seems fixated on the one so I simplified the argument. (Also, note that I gave them the benefit of assuming 100% "overhead" in the major loss category in part as knowing there are other claims as well as simply an estimate of costs associated only w/ payout of total-loss claims) As you note, the actuarial data are the key thing and having sound data soundly applied are imperatives to maintaining a healthy position as an underwriter (and having sufficient assests to "ride out" the inevitable short-term statistical fluctuations, of course. :) ).
As to the specific subject risk at hand in the current discussion, I suspect (although I'll grant I don't have any inside information) that the situation is a combination of not sufficient solid data that the particular item itself was a root cause combined with insufficient losses from claims where the item could have been at fault to make it come to the forefront in an evaluation of where to put actuarial research investment and the knowledge that it is a relatively small fraction of all homes already and that percentage is going down all the time. Consequently, it is simply not an area that has sufficient long term payback to the insurance industry to invest in the necessary effort to develop rate premiums specifically against K&T. So, as you also note, they resort to either the occasional or regional/local declining to underwrite or, perhaps, require the inspection that it meets the grandfathered code requirements.
Still, at least here, it has been far more common for the actual requirement to be replacing fuse boxes rather than sound K&T wiring in all the old houses that have been refurbished as part of the local revitalization project refurbs. Most of these will eventually get completely rewired as part of a major reconstruction effort, but that may take the new owner some 10 years or more and what we're doing is getting first-time homeowners into something they can afford and that is safe _first_. In order to do this, it makes no sense to put resources into something that isn't a problem. In some cases, the condition of the wiring has been so poor as to make that a part of the mandatory first stage reconstruction to make the house safe for habitation, but often it has not been.
Anyway, I've said all there is to be said, and more.... :) As I think I noted elsewhere, it seems that the industry in general forgot about common-cause in a period of low activity in the SE US and in a competitive fervor grossly underevaluated true risk from a catastrophic event. It will take some time for these effects to be absorbed and a new equilibrium to be achieved. But that type of risk estimation is totally apart from individual homeowners.
A neighbor of my wifes sister in MD. They came home put car in garage and friends picked them up for dinner. when they returned home there was no home total loss after 8 month fight with insurance company. I was in part of this home it was truly gone. they only reused foundation. fire caused by vehicle in garage.
good friends had fire, cat knocked over lamp they were home. $135,000 damage to a 90K home insurance on structure ONLY, their roof was bad, insurance company sold new company wouldnt cover them. forced place coverage on structure only.
my next door neighbors car caught on fire in driveway, fire went up front of home. realtively minor damage about 40 grand, mostly to elminate smoke odors.
a good friend had trees hit home during terrible storm, 30 thousand damage for roof structure and minor water damage.
the above gals next door neighbor, fire destroyed home total loss. about 150 grand plus possesions
a old friends home hit by lightning many years ago, about 30 grand damage minor fires thruout home.
Its amazing I didnt realize how many people I know had home disasters
State Farm should have asked. By not asking, the producer ignored or was uneducated to very important underwriting requirement in qualifying for home insurance.
I worked for an insurance brokerage for over 20 years (as IT support) and my daughter as a broker/customer support agent. Newer than a certain age they won't ask because virtually no house will have K&T - but on the newer ones (in certain age range ) they DO ask about aluminum wire. They require an electrical inspection and certification of safety and suitability for use for either - and more than a few "lighting only" circuits in K&T just won't pass muster. The BIG issue is how do you connect K&T to the common NM wiring?- and meet code - - - They also REALLY want fuse panels updated to breakers - which again pretty much REQUIRES upgrade from K&T as you can NOT wire K&T to a current breaker panel and meet code. Also, when the panel is replaced an inspection is required --
All of this is true in Ontario Canada - you may "get away with" a lot more depending where you are located.
They won't cover a house with galvanized water pipe up here any more either - and they are VERY wary of cast iron drain pipes too. Also starting to shy away from copper drainage pipes - stacks in particular - again this is in Ontario Canada.
HomeOwnersHub website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.