Most of the research shows up to 90% of all policyholders renew automatically. Only the remaining 10% actually consider the possibility of changing insurer and a variable percentage then makes the change. With such a low level of “churn”, insurers have little need to change their products to make them more attractive. There’s no real competition between them to force an improvement in the terms. As a result, insurers tend to act unilaterally, changing the terms with little or no warning given to their policyholders. Although some states have given their Insurance Commissioner the power to intervene, the majority of these changes are waved through. Everyone in “authority” assumes this is a perfect market where you are free to switch to a different supplier if you feel unhappy with the level of service.

So beware changes in the deductible. Up to two or three years ago, almost all insurers offered discounts if individuals opted between deductibles in bands up to $1,000. That’s no longer standard. State Farm is leading the way in forcing an increase in the minimum flat deductible. This is no longer a choice. It’s imposed as a condition of doing business with the company. So, in some states, a single family occupying a home will now be required to pay a minimum of $2,000 towards every claim made. If families bundle home and auto insurance, this is reduced to $1,000. When asked to explain the reason for this increase, the company was remarkably honest. It intends to deter claims. Most people decide not to claim, but pay for their own repairs when the deductible is high. This reflects the fact that most claims are for relatively small amounts and, if claims are made, insurers often retaliate by increasing the premium rate when the policy falls for renewal.

When other companies were asked to justify their increases of both rates and deductibles, the majority spoke about the increasing number of claims made because of adverse weather conditions. This last two years has seen more damage due to winter storms, and spring and fall have seen major tornado and hurricane damage. Indeed, last year saw record payouts by the insurers and this year will see last year’s record broken. If the companies are genuine about having enough cash in hand to repair or replace damaged homes, more money needs to be collected in and less paid out for the smaller claims.

These increases in the deductibles would not be so bad if the insurers were reducing their premium rates. If you deter small claims, there’s a cost-saving to pass on to the policyholders. Sadly, this is not happening in the majority of states. Even more depressing is the number of insurers imposing a change from flat-rate to percentage deductibles. So, if you own a $300,000 home, you could find the deductible ranging between $6,000 and $15,000 for some of the perils covered. Curiously, very few home insurance policyholders have lodged formal complaints with their local Insurance Commissioner. Either they feel powerless or they have yet to realize the change which is not always obvious when the home insurance quotes or renewal notices come in. If you are affected, shop around to find any local insurers who have yet to increase their deductibles.