Race to the Bottom: Part 1 

Amid turbulent insurance markets in Georgia and across the nation, a troubling pattern has emerged. Insurance companies are rapidly canceling policies using drones, while renewal premiums see sharp increases, and many providers cease writing new policies altogether.  Just yesterday, State Farm announced the cancellation of 30,000 home policies in California alone!  These actions have profound implications for families, jeopardizing their financial security and access to adequate coverage.

This use of drones by insurance companies to cancel policies has become increasingly prevalent, leaving families vulnerable and many times without recourse.  They are looking for trees overhanging the roof, potential roof repair issues due to age, or other conditions that could lead to a potential loss.  This concerning practice compounds the challenges faced by consumers already grappling with rising premiums and limited policy options. Families are often left with inferior coverage, as replacements from other insurers typically offer less favorable terms and lack financial stability.

Consider the plight of families without the means to pay higher premiums. They are left with two choices, bad and worse. First, they could move to an insurance company that may not back them up at the time of a loss but can offer affordable coverage. While this is good for next month’s budget, it could be catastrophic should a large home loss occur without sufficient coverage. The compounding issue here is that the same families that can’t afford proper coverage in the first place, are also the ones that can least afford a loss without being fully reimbursed. The other option that has been an increasingly prevalent practice, first in Florida and California, but now affecting other states such as Georgia, is foregoing coverage altogether. According to the Insurance Information Institute, up to 20% of homeowners in Florida have now decided to forego home insurance due to rising costs or the ability to obtain coverage. We don’t need to tell you how challenging a situation this creates should anything happen.

Perhaps just as concerning, you have families with greater assets beginning to willfully make the same choices as those who have no option. Faced with soaring insurance costs, some opt to move to lower-cost insurance companies to save money. However, this decision can have dire consequences, as illustrated by the recent total loss home claims we have witnessed with our clients. In each case, the cost to rebuild the home exceeded the limit on their policy. Thankfully, these clients were on guaranteed replacement cost policies that pay whatever it takes to rebuild the home. Had those same claims occurred with a “mass market” policy, each client would have been out of pocket hundreds of times more than they saved in premiums. These examples underscore the importance of staying with protection focused advisors, like Townley Kenton, who put client needs ahead of sales quotas.

Why are these families with assets increasingly compelled to seek cheaper insurance options?  Often, they are coerced by mass-market insurers promising comparable coverage at lower prices. While the allure of lower premiums may be enticing, the reality is that such policies often offer inferior coverage, even when the “limits are the same”. Because these companies are typically just focused on the sale, they are not concerned with diving deeper to ensure you will be protected should you experience a significant home insurance loss. Clients insured under “mass-market” policies have faced significant shortfalls in coverage, illustrating the potential financial devastation in case of a major loss.

As families navigate the complexities of the insurance market, it has become clear that the current trends are driving a dangerous race to the bottom. With cancellations, limited options, and the allure of cheaper premiums, families are left vulnerable to financial hardship and inadequate protection.

Policymakers and insurers must address these issues to ensure families can access affordable, comprehensive coverage that safeguards their financial well-being. At Townley Kenton, our empathetic and knowledgeable team is prepared to help guide you through these challenges and ensure your family is covered and protected.