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Insurance market insights from Alliant Private Client leaders

The insurance market continues to evolve, making it a fitting time to address the challenges our clients may be facing. Over the years, we have found knowledge is the best way to help clients navigate uncertainty. As such, two of our senior leadership team members have come together to share their perspectives and insights on the current state of the market and what the future may bring. Challenges in the current market What worries you the most right now? Cindy Zobian, EVP, Managing Director: While the challenging market was once contained to homeowner’s insurance, auto insurance and liability, rates are now also affected. We know this has all been very difficult for our clients. It’s understandably frustrating to see rates rise and hear about carriers leaving states. Mostly, I am always thinking about ways we can guide our clients through this market as seamlessly as possible. Alliant’s response to the market challenges So, how is Alliant meeting the moment? CZ: We’ve gotten more creative, taking an even more holistic view of our insurance programs. We’re helping clients use deductibles and co-insurance to offset the hesitance in the market; high deductibles are more attractive to insurance carriers. We’re also getting multiple carriers to share the risk, minimizing the burden of any individual carrier. The role of self-insurance There’s more talk about self-insurance these days. What do you think about this option? Mark Recht, SVP:  Some clients are inquiring about this option, in which they will take on the financial risk of a possible loss instead of purchasing insurance from a carrier. We are always happy to discuss this as an approach as part of the broader risk management strategy and sometimes it is the right choice. However, ultimately most people choose to have some insurance protection because it can be difficult to reenter the insurance market once you’ve opted out. CZ: Yes, we are always going to walk clients through the good and the bad of self-insurance; in the end, we want them to be able to make the decision that is best for them. The future of the insurance market Do you see any bright spots in today’s market? CZ: We know that insurance is not the most exciting topic however, the market conditions are providing us the opportunity to have more frequent and substantive conversations with clients to develop customized programs that meet their unique needs. Clients want to understand their insurance program better, so they are better equipped to make strategic choices. And that’s a win for everyone because it leads to better overall risk management. MR: We continue to collaborate with wealth advisors and other professionals to discuss risk management because they want to ensure that their clients have risk management programs that best meet their lifestyle and unique set of needs. Understanding the complexities of the insurance market Which aspect of the market is most difficult for clients to understand? MR: The market challenges are not just impacting specific regions anymore. The current situation started in 2018 in California, after the wildfires, and then impacted Florida because of the storms. This impact is now being felt nationally, if not globally. That said, clients outside of catastrophic-prone areas are now feeling the impact of these weather-related events like ice storms, flooding, and tornadoes. Conversely, those who reside in catastrophic-prone areas do have the additional concern of carriers leaving the state, in part because some state regulations don’t allow carriers to set mutually beneficial rates. Looking ahead: The future of the insurance market What does the future look like? MR: We’re optimistic. As more reinsurance capital becomes available and insurance carriers continue to seek innovative solutions, we are finding creative ways to tackle the challenges.                 CZ: Yes, we’re going to continue to learn and evolve. Almost every day, we find additional ways to offset these challenges. As Cindy and Mark shared, now more than ever, the proper insurance strategy is essential, both for property protection and wealth management purposes. As you review your goals and priorities, please don’t hesitate to reach out to your insurance advisor for guidance on your portfolio. ...

A guide to self-insurance

The ongoing challenges of the current market have made insurance quite a hot topic of conversation. Throughout many discussions, one type holds a particular fascination: self-insurance. The increased interest in self-insurance is quite understandable and generally leads clients to ask if they should be considering this option. To answer those queries, this guide discusses the benefits, potential downsides, and a few critical considerations so you can make an informed decision. What is self-insurance? To better understand self-insurance, it’s helpful to understand the difference between risk transfer and risk retention. Purchasing insurance is the most common form of risk transfer. This allows a third party to assume the risk by paying premiums to an entity such as an insurance carrier. One form of risk retention is also known as self-insurance. In this case, an individual chooses to assume the responsibility for a certain level of risk or losses. There are two ways of self-insuring: taking on a higher deductible, thus sharing a greater portion of the risk, or deciding to fully self-insure where you are assuming all of the risk. While self-insurance is an intriguing possibility, it is important to understand the financial exposure you are taking on in the event of a potentially catastrophic loss. That said there is an inherent shift in the mindset around risk management from being primarily reactive — something goes wrong, client submits a claim, carrier reimburses — to focusing on prevention — incorporating risk mitigation techniques such as implementing the latest technologies, materials, and recommendations to avoid a loss. The increase in both the severity and frequency of catastrophic losses has led to an advancement in technology and products to prevent losses. These advancements include sophisticated monitoring systems, protective landscaping, element-resistant materials, and construction and evacuation plans. As such, some people are calculating whether it makes more sense to accept higher deductibles and assume a greater portion of the risk or to fully self-insure and redirect the money into proactively protecting their property. The advantages and disadvantages of self-insuring The upside of redirecting your insurance money is that funds spent on premiums for a policy that covers a high-net-worth home could be placed towards cost-effective protective measures. For example, a home in California’s wildfire region could likely redirect funds to purchase a fire break system, flame-retardant roof, drought-resistant landscaping, or even access to a private firefighting company, therefore mitigating the risk of a major loss. As enticing as having no premiums to pay may sound, it is important to understand that there are disadvantages to self-insuring. First and foremost, the financial obligation associated with a catastrophic loss could be substantial. Additionally, if you choose to self-insure your home, carriers may be less inclined to insure you for other risks, such as an auto policy or significant liability coverage. Moreover, you will no longer have resources such as a dedicated claims team, pre-storm guidance, or priority access to high-caliber contractors that could be available after widespread devastation. Additionally, canceling a policy with an admitted carrier makes it challenging to re-secure a new policy should you change your mind or circumstances change. In this case, you will likely have to leverage a non-admitted carrier which comes at a higher cost. Moreover, you will need to sign a “no-loss letter,” promising not to report any losses that occurred during the period in which you were uninsured. It is important to note that there are several precluding factors for self-insuring. For example, except in very rare instances, a mortgage company will require you to purchase fire insurance to cover the cost of your loan. Similarly, there are coverages required by law whether you self-insure other assets or not, such as workers’ compensation. Leveraging your team of experts before your decision Before you decide to utilize risk retention, it’s critical to consult with your insurance advisor. In this conversation, we will give you an honest evaluation of the advantages and disadvantages of the strategy, for you, as well as a range of creative alternatives. It is best to include tax, wealth, and legal advisors in the decision as they will be best situated to determine if your finances and personal standing could absorb a major loss. We can also provide further guidance on modeling for your portfolio of properties and calculate your probable maximum loss.    We understand the growing movement towards self-insurance and are happy to guide you in a discussion about whether this might be an appropriate choice to explore. Our experience has shown that an educated analysis with a knowledgeable risk management team is crucial to helping you make the right decision about this and every strategic risk management decision. ...

Filing an insurance claim in today’s evolving market

As we continue to navigate this unprecedented insurance landscape alongside you, our consultative approach to handling your potential claim is more important than ever. With insurance carriers continuing to raise premiums or, worse, decline renewals of long-standing policies, we want you to better understand the broader shift around filing even the smallest claims, which can help safeguard your long-term insurability. As such, our recommendation is that you call us first to discuss any loss or possible claim. To state it as clearly as possible, we never want you to file a claim directly with your insurance carrier before speaking with your personal account executive or with our dedicated, 24/7 claims team (800-221-5830). As your risk management advisors, we will look holistically at your insurance program and offer guidance as to what we think is the best approach for your specific situation, and given the market, so that you can make the most informed decision. This discussion will also allow us to best support your choice and advocate on your behalf. To help you prepare for such a conversation, we have outlined the six key considerations we would explore together before you decide whether to file a claim: 1. Was the loss caused by a catastrophic event? When the answer is yes, our team will most likely advise you to file a claim. The industry codes for catastrophic events like wildfires, floods, major storms, and earthquakes, which allows carriers to isolate related losses and means they will likely not hold that claim against you when it comes time to renew your policy. 2. Was a third party involved? If someone is injured or another person’s property is damaged, we will most likely recommend that you file a claim to ensure your assets are protected. With that in mind, we encourage you not to pull out your checkbook at the scene of a crash in the hope of avoiding an insurance claim, nor should you ever volunteer to cover someone’s losses before consulting our claims team or your account executive. 3. If no catastrophic event or third party was involved, what is your tolerance for paying out of pocket? Our claims experts have begun to ask how much clients are willing to cover themselves. If the cost of replacing whatever you lost falls within this amount, they then generally suggest you do not file a claim. 4. How will filing this claim impact your risk management strategy going forward? Someone who files too many run-of-the-mill claims risks being deemed by insurance carriers as “no longer profitable.” In the end, carriers are businesses that need to earn money to ensure that they can pay out claims while being financially successful, and that has become increasingly difficult to achieve as weather-related events have increased in frequency and severity as well as costs of replacement and reinsurance have risen. Additionally, construction (material and labor) and auto repair costs continue to increase. So, when it comes time to renew, they are paying more attention to claims histories, especially for water damage and auto accidents. That’s all the more reason we might recommend you handle whatever you can on your own, thus preserving your insurance for catastrophic losses. 5. Is there any reason for you to choose not to file this claim? No doubt it is frustrating to pay for insurance and then choose not to use it for a covered claim. However, after our discussion, you may decide that it’s not worth filing the claim as it could impact your future insurability and once you lose coverage it is very hard and expensive to get it back. If that’s the case, we will recommend other adjustments that may help lower your premiums, such as increasing deductibles or assessing exposures and coverage to make sure you are paying only for what you need. 6. Can we help you be even more proactive about preventing future losses? As you no doubt know, an ounce of prevention can save you thousands in repairs. This is why we regularly educate our client’s around proper maintenance. It’s crucial for you or your caretaker to do things like caulk around windows, clear drains and gutters of debris and check that the sump pump is operational. Taking the time to walk around your home and find the spots where a small investment will prevent a loss that in turn will save you money and effort in the future. And we are happy to provide further guidance and best practices if there is anything we can do to help in this process. Our primary goal is always to protect you and your family's long-term interests. This is why we will work together to guide and advocate for you throughout the claims process. And it’s why we hope your first step will be a call to our team and not the carrier. We can advise on the steps required to handle your immediate loss and keep you insured long-term, as we have done for clients for more than a century. ...

The impact of natural disasters on the insurance industry

With predictions of another season of significant weather events in the air, it’s important for us to give you an update on the current insurance landscape. The insurance industry is constantly evolving due to many factors and our goal is to keep you fully informed so you can better understand what is happening, why, and what you can do to mitigate the impact on your insurance program. The insurance industry is in the midst of a correction that largely began in California a few years ago and continues to spread across the country, particularly to regions most susceptible to wildfires, hurricanes, and other catastrophic climate events. Despite this, Americans continue to move into these areas, and that has put a serious strain on insurance carriers, which, in turn, is increasingly impacting even less-vulnerable areas. In the past five years, the U.S. has experienced 89 weather-related events that caused at least $1 billion in damage, and that trend is not abating. In 2022 there were 18 separate billion-dollar events making it the third most costly year on record for hurricanes, freezes, severe storms, wildfires, and floods. Floods, in fact, are the country’s most frequent and costliest natural disaster, now occurring often in areas not previously considered to be high-hazard ones. All of which means premiums continue to climb higher, non-renewals are more common than ever, and it is increasingly difficult to obtain coverage, wherever you live across the country. This is no doubt, frustrating news to clients but does have a silver lining: Several years of navigating this market has made our team extremely well equipped to guide you through its challenges and find creative solutions best fit for your unique needs. Three factors driving the market correction Insurance carriers engage in a constant struggle to sustain an economic model that allows them to pay the broadest number of claims. This moment in time remains a particularly tricky one for them because … 1. Capacity is low. Today’s carriers are significantly overexposed after decades of securing increasingly expensive homes in areas that have borne catastrophic losses from weather events. Even premiums that may seem unreasonably high to individual policyholders do not sufficiently cover carriers’ aggregate risk. Not only has this overexposure made carriers tighter with rates, but it has also made them more likely to refuse coverage altogether. This is the case in affected and unaffected areas alike, especially for owners of older homes that are not fitted with the latest protections or do not meet current building codes. A similar reluctance is occurring in areas like New York City, where aging infrastructure makes carriers wary. 2. Reinsurance costs are high. If carriers were left to pay off losses solely with the money they took in from premiums, insurance would be unsustainably expensive. That’s why they support their own exposure with reinsurance, essentially, coverage for losses they can’t cover on their own. Reinsurance guarantees carriers have enough cash no matter the cost of a loss. That said, the current combination of increased catastrophic events and heavier concentrations of multi-million-dollar homes in vulnerable areas impacts both insurance and reinsurance carriers. In fact, so drastically, reinsurance is now much costlier than before. When those rates rise, it makes it that much more complicated and expensive for carriers to provide adequate coverage for clients. There comes a tipping point when reinsurance becomes just too costly, especially government-regulated ones that are required to carry a certain surplus. 3. Inflation is making everything worse. The cost of replacing almost everything is significantly higher these days. Labor and materials are at sky-high prices because of ongoing supply-chain issues and skilled-worker shortages. Vehicle repair costs, to take one example, have risen steadily, and faster, in the past two years. The latest premium appliances may be more technologically advanced, but that also makes them more expensive. Much more basic materials such as paint, lumber, roofing and plumbing are pricier, too. And these costs continue to climb higher after a catastrophic event which puts pressure on available resources. Smart risk management strategies We continue to provide innovative solutions to help protect you and your belongings. But we also want to put you in the best possible position to ride out these challenging times. Specifically, we recommend that you… Do everything in your power to avoid a loss. Yes, accidents and climate events will unfortunately happen, but you can better prepare your home and property for both. Simple pre-emptive steps such as creating a brush-clearance zone in a wildfire-prone area or undergoing a windstorm mitigation inspection in storm-heavy areas are crucial. We can also help you schedule walk-throughs with professionals, who will spot potential trouble areas and recommend preventative measures. Likewise, we encourage you to embrace the available technology to minimize the likelihood of water loss or wind damage such as water leak detection devices and more. Protect your insurance coverage. A history of previous claims, even a short one, is often a strong predictor of premium hikes and non-renewals. It can also make it more difficult to secure new coverage. Thus, we encourage you to speak with your insurance professional prior to making any potential claim, so we can help you decide how best to proceed. (In some cases, that means taking on the expense yourself if possible.) Choose coverage strategically. If, as we suggest, you plan to file claims only in the most onerous scenarios, you can lower premiums by choosing higher deductibles. Other situations may call for you to self-insure or partially insure. For example, if your home has the best-possible wind protection and you do not carry a mortgage, foregoing wind coverage to make the premiums more reasonable might be a viable option. Contact us before signing a contract on a home: If you are considering buying in a risky geographic area, your broker can tell you if you will be able to purchase coverage—and whether the cost will be prohibitive. We understand that this is an extremely challenging market, but we are confident that we can help guide you to make it more manageable. If you have any questions about the current state of the market or whether your personal portfolio is adequately protected, please know we are always here to help guide you and your family.   ...

Five things you need to know about flood insurance

Floods are the most common natural disaster in the United States, causing around $20 billion in damage to at-risk homes every year, a figure that is expected to grow to $51 billion by mid-century because of rising sea levels. This reality makes flood insurance an essential protection for a growing number of clients. At the same time, after decades of stagnant government premiums and few private-company options, the flood insurance market is undergoing a much-needed overhaul. This overview will help you understand what’s changing and how that will impact your coverage. Flood insurance has a very limited scope, but that doesn’t make it any less crucial. These policies don’t protect against damage from flooding caused by broken pipes and overflowing sewers, but only harm done by rising surface waters that result from storm surges, torrential rain or other weather-related events. The former concerns are typically protected by homeowner’s policies, which in turn do not cover rising surface waters. For almost 50 years government-backed flood insurance was the only option, but that is changing. In the 1970s, the federal government—in an attempt to cover some of the inevitable costs of rebuilding after a disaster—created the National Flood Insurance Program (NFIP) which is managed by the Federal Emergency Management Agency (FEMA). To take part in this program, communities are required to adopt and enforce regulations that help mitigate flooding effects. For example, homes must be built sufficiently above the base flood level. Once a community agrees to participate, every dwelling is eligible for NFIP coverage. The NFIP caps coverage at $250,000 per dwelling and $100,000 for the contents, an amount that is clearly not sufficient to offset losses in expensive areas, like the Hamptons, Fire Island and Southern California. But since most private insurers didn’t offer flood insurance, homeowners had little choice but to make do with the NFIP offerings. Now, though, with 50 years of data on which to base calculations of coverage and premiums, some carriers are offering policies. Unlike with the NFIP, carriers aren’t required to offer coverage to everyone but for those who do qualify, the protection can make a big difference and can offer broader coverage limits. As such, many clients are incorporating these policies as part of their risk management strategy. Government-backed flood insurance premiums are getting more expensive. The NFIP program has long struggled with solvency, but the incredible costs accumulated over the past decade with increasing catastrophic storms with surges and heavy rains forced FEMA to reevaluate the system. The result, Risk Rating 2.0, allows the government to collect premiums that are commensurate with the specific flood risk of each dwelling. Its rollout began October 1, 2021 and was completed April 1, 2023. A few important points regarding the new pricing, which is calculated on a dwelling-by-dwelling basis: Vacation homes are losing discounted ratings and thus will automatically pay higher premiums. Large properties, which have a higher exposure because of their expanded footprint, are seeing higher rates. Coastal homes and other high-risk areas are being particularly affected. Houses built to code and that incorporate all flood-proofing measures have more stable rates. Preventative measures may not be easy, but they are worthwhile during renovations. Old homes that do not meet flood-resistant codes are grandfathered into NFIP policies, and those policies, in turn, roll over to new owners. However, renovations that affect more than 50% of a house must accommodate the new flood-resistant codes. Also, we recommend that clients incorporate flood vents if there is enough room below ground level. Obviously, these tasks can be costly, but they are also well worth the consideration. Not only will they make your home a safer place to live, they will also potentially reduce your NFIP premiums and greatly increase your chances of securing private flood insurance. House hunters should consider flood risk and insurance before they buy. A quick call to your insurance advisor before signing a contract in a high-risk flood zone can save you a lot of stress later. At the very least, you can get a sense of the risk level involved in the purchase, the possibility of obtaining private flood insurance and the cost of expected premiums, all of which will help you make an informed decision. Unfortunately, all evidence suggests floods will only continue to increase, becoming the new normal. If you are concerned about flood coverage for your home, please reach out as we can help you navigate this tricky landscape. ...

Building resilience in today’s insurance landscape

Only eight days into 2025 and the landscape has continued to shift, causing many clients in Southern California and beyond to ask fearful questions about the insurance industry’s future and risk management. While we have all grown accustomed to watching natural disasters on our television screens or, unfortunately, even closer, few have left people feeling as uncertain as Southern California's recent wildfires. As risk management advisors, we strive to provide accurate information and offer best practices to help you navigate the next phase of the personal insurance market, wherever you may live. Trust that we have been ultra-responsive, with boots on the ground, working hand-in-hand with clients and carriers to get ahead of the situation. In Southern California, we anticipate that homes will be rebuilt with improved building standards to better withstand such events in the future, events that, make no mistake, are likely to continue in the face of a changing climate. Fortunately, new fire-resistant materials and other innovative products and technologies to monitor water flow, temperature, and electrical surges now exist to help mitigate risks. They should be employed in all homes. We are hearing from clients nationwide who are concerned about whether the insurance industry can withstand a catastrophe of this size. Rest assured, the ability to recover from such an event has been well modeled. The bottom line: insurance carriers are well capitalized. The industry will be okay. Exactly how the impact will be felt — locally and nationwide — is yet to be determined. Until more is known, we remain focused on helping clients everywhere with proactive loss control. In most circumstances, preventative actions will minimize future loss and heartache. Here are additional best practices we recommend to all our clients as the landscape continues to shift: Loop in your broker and family members. Whatever the situation, whether you are in the market for a new home, expecting a child, or considering filing a claim, we urge you to consult with your account executive. The more your insurance advisor knows about your future plans and shifting life stages, the better they will be able to help you protect your assets. Similarly, it’s important to have regular conversations about risk within the family. Children, especially teenagers, must understand the potential liability inherent in posting on social media, hosting a party (especially unsupervised events), driving, or college hazing. Minimizing unfortunate surprises also means ensuring spouses understand your insurance program's details. Perform regular policy reviews. Set aside time — at the beginning of the year or when the policy is up for renewal — to review your coverage details, ensuring they remain sufficient and current. For example: Are the correct beneficiaries listed? Have you insured recent acquisitions? Do you need a flood policy to account for shifting climate patterns? In addition, if you have not done so already, enroll in autopay for your premiums. This will safeguard your program by preventing the possibility of missing payments. Strive to prevent avoidable risks. As always, an ounce of prevention is the best protection. We recommend performing background checks before hiring domestic workers, contractors, or anyone else working in or around your house. Also, ensure you have the proper worker’s compensation in place. Regular property inspections are also important; addressing any issues promptly, whether urgent or minor, can prevent bigger problems later. Today’s small hole can become a devastating leak in a storm, and untamed brush can fuel tomorrow’s fire. It is also wise to make plans for potential catastrophic events, such as where to safely store an electric vehicle or how to evacuate collectibles. After a few years marred by earthquakes in New Jersey, floods in North Carolina, and hurricanes in Hawaii, it is clear that no region is immune to once-implausible weather events. Confirm your liability coverage is enough. In a recent survey, one of our carriers found that 92% of high-net-worth individuals were concerned about the size of jury awards in potential cases brought against them. And though that’s understandable in an era of social inflation and nuclear verdicts, few respondents carried sufficient liability coverage. If you think you might be in a similar situation, check in with your account executive or take advantage of our online tool, What’s My Liability. We remain committed to guiding our clients through every difficulty and towards greater resiliency and the best coverage options. Such work is collaborative, so if you have questions or concerns about current trends or your personal program, please be sure to reach out. ...