Community Communication Corner
by Bob Gourley, MyEZCondo Founder, Member of CAI CT Board of Directors

A Mighty Wind May be Raising your Common Fees… Telling the Insurance Story

Have you ever heard of the Connecticut State Insurance and Real Estate Committee? Unless you are a big fan of state government or have had to appear before this gathering of legislators, chances are you may not know anything about this important group of lawmakers. According to the State of Connecticut General Assembly website, this committee is comprised of 19 members of the State Senate and House of Representatives. Collectively, their mission is to “have cognizance of all matters relating to insurance law and real estate law”.

Earlier this year, Robert Hartwig, Ph.D., who is the President and Chief Economist of the Insurance Information Institute, made a formal presentation to members of the Connecticut State Insurance and Real Estate Committee. While his presentation contained some standard fare of the importance of a financially strong insurance industry, his presentation was also loaded with a hefty dose of hurricane and coastal erosion risk and vulnerability analysis. The latter has gotten my attention as I feel it will have a direct effect on our communities and the insurance premiums all communities in CT will face in the very near future. As a communication story, the subject matter is a bit academic and even uninteresting, so telling the story is a challenge. Dr. Hartwig has given a good synopsis of what you need to know.

During his presentation of recent catastrophic disasters throughout the country, he cited 2005 as the worst year ever for insured catastrophe losses but that the forecast is that THE WORST IS YET TO COME! Hurricanes alone are not the only culprit. Tropical Cyclone Activity has been reported in the state and with an increase in those reports comes an increase in the likelihood that there will be more. That’s not good news for anyone who has to purchase insurance for their communities. It is also bad news for residents of those communities who will most certainly bear the brunt of the increased premiums that are sure to follow news like this.

Dr. Hartwig’s presentation then focused on coastal exposure. It is hard to imagine that our tiny state ranks second in the highest amount of coastally exposed property in the U.S.. Only the state of Florida has more. 63.1% of properties in the state are considered coastally exposed and that puts us squarely in a greater “risk of claim” pool that the insurance industry uses to calculate risk and, ultimately, premium. Add to that our expensive real estate prices and our little state is at big financial risk, to the tune of $205 billion dollars worth of real estate.

Of course, Dr. Hartwig’s presentation was not all gloom and doom. His expert opinion was sought to help our legislators get a better grip on what factors are causing our insurance rates to raise. The reality of a direct hurricane strike in New England is low, although there is always a possibility for catastrophe. The reality of an increase in claims due to Tropical Cyclone Activity is very real to insurers who must weigh the increased severity of storms with sustained winds and the claims for the monetary damage they can cause.

My advice to community leaders is to get out in front of this trend. Tell the story of what the experts are saying and work closely with your insurance provider to develop a realistic budget for your insurance needs. Since the rates are likely to be going up substantially, communicate with your residents the need to set aside the funds to pay for those increases. While asking for more money is never a popular strategy, the need to do so is very real and you are already armed with the knowledge that these increases are coming. It is just a matter of time before your community will bear it extra burden of increased insurance premiums.

(Editor’s note - For more information on the Connecticut State Insurance and Real Estate Committee, including members, bills in progress, and a schedule of upcoming meetings please visit their website at http://www.cga.ct.gov/ins/ For more information on the Insurance Information Institute, please visit their website at http://www.iii.org The full text of Dr. Hartwig’s presentation is online at http://www.iii.org/media/met/connecticut/ and can be viewed in PowerPoint or Adobe PDF format.)

Back to list of articles