When insurance companies issue a “non-renewal” to certain policyholders, we get a lot of questions about why this dramatic decision gets made. Whether it’s a residential or commercial policy, the effects can be disruptive. Why do carriers take this step?
To find out the best reasons, we talked with Kristen Bowen and Andrew Denton, insurance agents with Wellesley based Deland, Gibson Insurance Associates. Kristen and Andrew are local insurance agents – remember to Buy Local! – and provided a helpful overview of why non-renewals happen. Kristen and Andrew put these reasons in three buckets, from the residential and commercial sides, as highlighted below.
Residential
- Property-related reasons
These can involve a number of issues related to the policyholders’ property, including submitting a lot of claims, usually for small or minor items. Several severe claims might also prompt a non-renewal. Carriers might also go non-renewal if they see certain high-risk issues, such as a roof that is in a bad location or deteriorating, or cracks in the foundation. There are also items that get identified during an inspection, such as wiring problems. Any change in how the property gets used can also prompt a non-renewal – think of homeowners who become snowbirds and suddenly decide to rent out their home, or people opening a daycare in their home. These are changes in the use of their property that might not be covered under the existing policy. - Customer-related reasons
Carriers can issue non-renewals when policyholders make unpermitted changes to their property. These might include installing a pool – or failing to properly fence in an allowed pool – or adding a trampoline or zipline. One area of customer-related non-renewals that is on the rise involves policyholders getting a dog that is not on the ‘permitted’ list of acceptable breeds. People might try to disguise their adopted pit bull as a different breed, but if your insurance carrier learns of this ruse, it can lead to a non-renewal of your policy. - Insurance strategy reasons
Sometimes a carrier will issue a non-renewal because they are making a strategic business decision. A carrier might decide that insuring properties in coastal areas is unprofitable, for example, and end up pulling out of entire areas along the oceanfront. Sometimes, a carrier pulls out of a state entirely – we’re seeing that right now in both Florida and California. These strategic decisions are based on the potential for high-loss claims. Your local agent can likely help you pivot to a different carrier who will insure in that area, but the policy premium is likely to go up from your previous policy.
Commercial
- Frequency of losses
As with residential non-renewals, carriers will tend to non-renew when loss claims repeat themselves. More than one sewer back-up claim, for example, will prompt the scrutiny of a carrier. Multiple small claims, especially repetitive claims, can result in a carrier issuing a non-renewal. - Loss of control
If the insurance carrier conducts an inspection and finds something they don’t like, they will quickly issue a non-renewal. These situations usually occur where the policyholder loses their ability to manage or prevent losses that might happen on the property or in their operations. If the situation can be rectified, the non-renewal can perhaps be avoided, but once the carrier makes a non-renewal determination, it can be hard to reverse it. - Reinsurance
Market changes are greatly influencing carriers, which explains why coastal areas are such a big issue. Carriers just don’t want the risk exposure, and it’s primarily driven by reinsurance agencies flagging these as areas of concern. The ‘habitational’ sector had some challenges, prompting extreme reactions from leading carriers that dumped a lot of premiums to get out of that class of business. Commercial auto might go through a similar change because carriers are facing reinsurance concerns. - Buy Local!
Andy emphasizes that a good local agent can help policyholders address these challenges. Andy likes to work with carriers he has leverage with. If there is a nonrenewal, if the carrier values him as an agent then he can help reverse those decisions. The more business he sends to carriers, the more he’s invested with them and the more leverage he enjoys.
