Homeowners insurance: Don't go bare

"There are market cycles in insurance when commercial insurance gets very expensive, and strategies to deal with them," Perr says. "These catastrophes have been coming for years and years and years."

The last large-claim and insurer retreat was six years ago, when droves of Texas homeowners discovered they were living with mold. "That was never planned to be covered, and suddenly all the claims were filed," says Perr. Subsequently, coverages were excluded, premiums were hiked and insurers shied away from the state.

Now, says Perr, Texas is one of the hottest markets, and he expects the same will eventually happen in Florida and other areas where homeowners are now facing an insurance crisis.

"Other carriers see it as an opportunity to come in," says Perr. "No catastrophe will happen for a couple of years, no losses for a couple of years, then everyone comes back.

"Insurance is knee-jerk, no matter how they try. They'll double rates, write half the business and the loss ratio (claims paid compared with premiums collected) will drop and they'll make a huge profit.

"The board of directors will say, 'Florida made a huge profit last year. Can't we write more there?' Competitors will say, 'Look how much money that company made in Florida. Can we come in?'

"People forget about it," says Perr. "Companies make a lot of money and they come back. Consumers need to think of it that way."

The best thing an insurance-strapped homeowner can do in this part of the cycle is try to keep the costs down, says Perr, but stay in the marketplace.

Yates is bit more blunt.

"Noninsurance is really not an option," says the New York agent, "at least not a sane option."


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