Insurance Quotes & Advice

The recent abnormally cold weather in the U.S. just a few weeks removed from summer has many forecasters looking ahead to winter.  Forecaster agree that El Nino will play a large part in the winter season but their forecast’s have been mixed.

The forecast for the Northeast, the world’s largest heating oil market, called for equal chances of above-, near-, or below-normal temperatures and precipitation. Long-term forecasts for the region are difficult because weather there is generally not influenced by El Nino but by other factors.

Weather researchers believe El Nino was a big reason for the relatively mild hurricane season thus far and for that many insurers are happy.  The severity of the upcoming winter season will have an large impact on many different insurance sectors, like auto, property and health.

If the South experiences below average temperatures and above average precipitation, the number of auto accidents could rise significantly with drivers not accustomed to snowy weather.  On the flip side a mild winter in the northeast could see auto and property claims fall below normal seasonal levels.

Needless to say most Americans would prefer a mild winter if given the choice, especially residents in the Northeast.  With the economy barely out of a recession, residents could use the savings on home heating costs this year.

Insurers would also prefer a milder winter to coincide with the mild hurricane season, their capital levels have yet to recover from the beating it took from the financial crisis.

A large wildfire near L.A. and surrounding counties continues to threaten thousands of homes in the area.  A number of communities have had mandatory evacuations initiated but there have been a few holdouts who have defied the order adding to the strain of relief efforts.

Over 140,000 acres have already burned and more than 100 buildings have been destroyed.  Favorable weather conditions are expected during the week to help fire fighting crews in their efforts to contain the large fire.

Wildfires are typical at this time of year for California, at the height of it’s dry season and it’s not uncommon to have multiple fires occurring simultaneously.  Insurance premiums are high for the state due much in part to the relatively expensive real estate in the region, even with the decline of the housing market in recent years.

Some insurers have stopped selling policies in California, finding it economically infeasible to do business in the state with regulators vetoing recent rate hikes.  Property insurers in general have taken large underwriting losses this year coupled with their investment losses from the financial crisis.

To the great relief of the insurance agency, it’s been a quiet hurricane season thus far.  Hit hard by the financial crisis over the past year and with capital reserves at their lowest in years, the industry could ill afford an active hurricane season.

Weather researchers at Colorado State University noted for their annual hurricane prediction have lowered their forecast for the rest of the season to 10 tropical storms with 4 reaching hurricane status.  The National Oceanic and Atmospheric Administration had also lowered their forecasts at the start of the season.

It’s still too early for insurers to breath easy as the warm tropical waters of the Atlantic off the coast of Africa have been known to spawn multiple storms over a short period of time.  However if the industry can escape fairly unscathed this year, it would go a long way in speeding up the recovery time in rebuilding their capital levels.

Although many experts believe they still have the capital to survive even a severe season if just barely, it would do considerable damage to insurers for years to come.  If they had to make a big pay out this year, we would probably see a number of companies leave the market entirely and states would likely have to bear the burden of funding a public source of insurance if that were the case.

Florida which has taken a hard stance against premium increases, has already seen some insurers leave despite having funded a program to provide a cheaper reinsurance alternative for them.  The industry has already posted some large losses from underwriting this year and normally their investment income would more than offset this but that isn’t the case this year with the financial crisis having taking huge chunks of the value of their portfolios.