Kansas insurance companies have tightened up in the wake of record storm losses - and that's left some homeowners in a desperate search for coverage.
Since last year, an increasing number of Kansas homeowners have received coverage cancellation letters from their insurance companies.
The letters list all of the claims filed by the customer as the primary reason for being dropped.
"I was mad," says Rod Dalyniuk. His policy with American Family was canceled in February after 25 years of continuous coverage.
Dalyniuk’s letter listed 13 claims since 1987. Five of them were zero payouts, meaning a claim was made when he called, but Dalyniuk decided not to pursue it and never received any money. Most of his claims were for wind or storm damage. Two were for frozen water pipes. His most recent claim in 2012 was to recover the cost of spoiled meat when a large freezer went kaput.
"You think that’s what insurance is for. I did," he says.
FactFinder 12 Investigators learned hundreds of homeowners in Kansas are being dropped by their carriers. It’s not just American Family. FactFinder 12 Investigators were contacted by clients of State Farm, Allstate, USAA and other major insurance companies – all of them being dropped because of their claims history.
The more aggressive action by insurance companies represents a shift in business strategy as they look to recover from years of expensive storm seasons. In the last five years alone, insurance companies have paid out more than $3 billion dollars in storm related claims.
Large hail is often the biggest culprit. According to numbers from the Kansas Insurance Commission, 2011 was an especially bad year. Nearly $1.1 billion was paid out to storm victims. Generally, insurers will accept at least one major storm related claim without counting it against a client
"People don’t understand how insurance works," says Brett Olivier, a former insurance agent for eight years.
FactFinder 12 contacted half a dozen current agents in Wichita. All agreed companies have tightened up because of losses. But none would agree to speak on camera for this story.
Olivier says home insurance is primarily designed for catastrophic events like fires, tornadoes, or other acts of nature. He says too often homeowners treat their policies like "maintenance policies" and file claims any time something breaks or goes wrong.
A client’s frequency of claims is a red flag the insurance companies look at when deciding whom to renew, he said.
Homeowners who are dropped will find it next to impossible to get coverage with another major carrier. For the most part all of the large companies will see a person’s claims history and deem them too great a risk.
There are brokerages and smaller insurance companies that will offer policies, but the premiums may be higher and the coverage inferior.
There is a last resort for those who’ve been denied coverage by multiple companies. The Kansas FAIR plan insures the uninsurable. The program provides a basic policy with minimal coverage. If the amount of losses in a year exceeds the premiums collected, major insurance companies that operate in the state pay the difference.
No state funds are at risk with the program, according the Kansas Insurance Commissioner’s office. The number of people relying on the FAIR plan for coverage increased nearly 69% from 2009 to 2012.
Here are some tips to avoid being written off by your insurance company:
- Think carefully before file. It’s best to get an estimate of the damage before calling to file a claim. Weigh the cost against the size of your deductible and determine if it makes sense to file a claim. For example, if you have a $1000 deductible and the damage is $2,500, you might be better off just paying out of your own pocket. A good agent should help you with advice.
- Call a contractor before calling your insurance company. The moment you call that 1-800 number, a claim is opened. Even if you never collect a penny, the company can still count that claim against you. Have a trustworthy contractor assess the damage and help you decide how to proceed.
- Find a good insurance agent. Look for someone who will take your calls and thoroughly explain your options. Don’t use an agent who just tells you to call a 1-800 and hangs up the phone.