Update on Homeowners

Customers in states that have suffered major hurricanes are upset with the insurance industry. According to the J.D. Power and Associates, for the homeowners insurance industry overall, customer satisfaction has remained stable compared to 2004. However, satisfaction levels differ significantly from state to state. For example, in Florida, where four major hurricanes occurred in 2004, claims satisfaction is almost 10 percent lower than the rest of the nation.

Some of the dissatisfaction is understandable, maybe even inevitable for the industry. Some is probably attributable to confusion over what role insurers play versus those that are the responsibility of government (flood insurance) or charities (relief aid).
However, customer dissatisfaction is hardly confined to the Gulf states or to customers who have suffered major losses. Hurricanes and extreme events bring to the surface in one area problems that are just lying in wait elsewhere.

The recent catastrophes have pointed out serious underinsurance of properties, which can create the potential for disappointed customers as claims are settled. Although respondents indicate they’ve owned their primary residence for an average of 16 years, only about half of homeowners have had their home’s replacement cost value updated in that time.

Home improvement projects often increase a home’s value. While 41 percent of homeowners made significant structural changes to their home, 37 percent did not notify their agent or insurer.

While the ultimate responsibility lies with homeowners to be sure that their policies keep up with remodeling and rising values, leaving it up to insureds to take the initiative to contact agents is not the answer. Professional agents must be proactive in prompting their customers to keep them informed of upgrades. More than a quarter of homeowners do not even know which type of homeowners insurance policy they have, and another 24 percent mistakenly believe that they have a guaranteed replacement cost policy that pays for whatever it costs to rebuild their home.

Furthermore, 59 percent of homeowners insurance customers don’t feel responsible for the coverage limits, but rather believe the insurance provider or their agent bears the responsibility in determining the replacement cost needed to rebuild their property.

The study reveals that customers whose coverage is periodically reviewed are significantly more satisfied, even though they may pay a higher premium.

The industry must do a better job of assuring that current home values are reflected in policies and that those who need it buy flood insurance. In the end, customer satisfaction comes with a premium.

Leaving it up to insureds is not the answer. Professional agents must be proactive in prompting their customers to keep them informed of upgrades.