The Property Insurance Blog

Image Source: blog.kir.com

Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer.

Insurance fraud can be classified as either hard fraud or soft fraud.

Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to receive payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars.

Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in a collision an insured person might claim more damage than was really done to his or her car. Soft fraud can also occur when, while obtaining a new insurance policy, an individual misreports previous or existing conditions in order to obtain a lower premium on their insurance policy.

The 2008-2009 International Insurance Fact Book is now available from the Insurance Information Institute’s online store. The fact book contains statistics on the property insurance industries, as well as life insurance in 89 countries and provides the population, number of premiums, GDP and regulatory bodies of each country, as well as world rankings in terms of revenue and reinsurance. For more details of the insurance industry in the United States, the III store has the 2008 Insurance Fact Book, which details information across the states in handy almanac form, with updates on auto and home insurance claims and an added glossary.

The four higher financial security ratings merit the Security Circle icons, showing S&P’s confidence in the future performance of these companies.

An insurer with a BBB rating indicates Good financial security.

An A rating means the insurer has Strong financial security characteristics.

A rating of AA means that the insurer has Very Strong financial security characteristics.

The AAA rating, the highest issued by Standard & Poor’s, reflects the Extremely Strong financial security characteristics of the insurer.

A high rating does not always mean the the insurer will deliver the best service. It is still best to use the combinations of ratings and the experience of other users to decide which policies and companies to purchase.

Insure.com offers these explanations of insurer ratings to make it more accessible to the homeowner. A rating of NR means Not Rated, or there is no opinion given on the financial security of the insurer. A rating of R stands for Regulatory Supervision, at which time the regulators have a say what obligations must be paid over other obligations. We will go over the ratings in ascending order. In this post, we look at ratings considered vulnerable by Standard & Poor’s.

A CC rating signifies Extremely Weak financial security, suggesting that some financial commitments will probably not be attended to.

A CCC rating means the insurer has Very Weak financial security and may only be able to meet financial commitments depending on the business environment.

A rating of B indicates Weak financial security characteristics. If business conditions are not favorable, its ability to fulfill financial obligations will be hampered.

A rating of BB means the insurer has Marginal security characteristics. In case of adverse business conditions, there may be decreased ability to meet financial commitments.

In an industry that looks at the long-term, financial health is important. This is why Standard & Poor’s rates insurance companies. In this Internet age, making sound judgments is more important than ever, many now purchase insurance online. Note that S&P ratings are opinions, not specific to policies, and based only on information from other organizations. Ratings are not endorsements or guarantees.

Before we go into the letter grades, let us look at the ‘pi’ subscript. ‘Pi’ ratings are based on information available to the public and not as in-depth as ratings without it, which were analyzed through more comprehensive information from the management of the insurer.

Letter ratings may be followed by plus or minus signs to show their standing relative to others companies in that category.

For everyone’s awareness, let me emphasize that there is no law that requires homeowners to apply for an insurance policy program. In contrast to this, if a homeowner borrows money from a banking or loan company to buy a house, the lending company will need to take a particular deed of trust or mortgage to be able to protect its interests that will stretch up to the day where the loan has been fully repaid. This certain mortgage will require homeowners to have an adequate amount of insurance to cover the reconstruction or repair of the house that was bought.

In claiming an insurance, when your house was involved in a fire or whatever circumstances that your valuables were lost, your insurance company most certainly will require you to submit a list of all the lost or destroyed items. Your up-to-date personal property home inventory should come in handy at this point in time. Personal properties include furniture, appliances, electronic gadgets, jewelries, clothing, among others that you consider your own. If you have a list of these valuables, you will have an idea on how much you should get as coverage amount or if there is a need for an increased replacement cost coverage.

Some people may ask, “If I only rent a house or an apartment, will it still be advisable for me to have insurance?”

The answer is yes. Even if you don’t own a house, it is still likely that you own personal items that are valuable to you. These valuable items might be too expensive for it to be easily replaced whenever it is damaged or stolen. In addition, you have to legal liability to any person who gets injured on the property that you are occupying. If there is a Homeowner’s policy, there is also a “Renter’s Policy”. This is essentially similar to Homeowners Policy minus the coverage for the structures or buildings. With this taken out of the equation, the Renters Policy is way cheaper than Homeowners Policy.

In deciding how much actual property insurance you need, it is wise to look at two things before deciding; replacement cost and current market value. The usual practice is to insure the property for the market value or appraised amount, however, in many cases this is not enough because this amount is influenced by outside forces that are most of the time beyond the control of property owners. That is why you need to take a look at replacement cost. Think of all the added items placed in the property since it was bought and take into consideration a worst case scenario, like your property burned to the grown and nothing but the land is left. How much would it cost to rebuild your property to the state it was before the accident in the shortest possible time? How about the lost income, if any, from your property that will stop because of the accident? Thinking of all these conditions will give you a better appreciation of the actual amount of property insurance you need.

Determining your insurance premiums depend mostly on the frequent perils or risks your business encounters on a normal basis. Understanding statistical risks associated with your line of business is the job of insurance providers and based on this assessment, they can adjust policies to provide for greater protection. The primary factor in setting premiums include building structure type, safety measures in place and the location of the property to various high risk areas.

Based on this information, basic rate is adjusted based on the discretion of the insurer basing it on history of claims or definite measures for loss control. Dividends are usually used, when rates cannot be adjusted, in order to reduce premium rates. Dividends however are not guaranteed and are only good when you actually have the check in hand.