How Kansas Severe Weather Can Affect Insurance Premiums

By: Release (Posted by Josh Mabry)
By: Release (Posted by Josh Mabry)

Release from the Kansas Insurance Department

TOPEKA, KS — Three or four times a year the Kansas Insurance Department (KID) will get a call from a news reporter asking how the latest severe weather outbreak is going to affect premiums for homeowners and auto insurance. This happens most frequently following a hail event that covers a larger metropolitan area.

Our best answer to the reporter isn’t simple; almost everything involving insurance rarely is. In this era of the pat answer, we can’t provide one, because many factors go into a company’s determination of your insurance premiums.

Because this question pops up regularly, we have compiled a list of factors that might help you understand when and how a homeowners or vehicle premium increase could occur. Below are some of the more important items to consider.

• It may take up to two years before an insurance company reflects weather-related claims experiences in their current rate adjustments.

• Most companies file for rate adjustments yearly based on five years’ worth of claims experience. The companies factor out anything in excess of normal, taking out catastrophic losses (such as major tornado damage) and averaging them over a period of time, such as 20 years.

• Property and Casualty premium rates, through state legislation passed a few years ago, can increase or decrease up to 12 percent (called a “flex rating”) without approval from the Kansas Insurance Department.

• KID can, however, intervene at any time to determine the reasons for the premium change.

• Insurance companies look at total losses versus premium in helping to calculate rate adjustments.

• Multiple insurance companies are involved in Kansas weather-related losses each year. Premium adjustments can be different for each company.

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• Adjustments can vary within the state. This is usually determined by each insurance company’s territorial map.

• Companies can be reinsured for catastrophic losses to their policyholders. Reinsurance is insurance that is purchased by one insurance company from one or more other insurance companies. There are different levels of reinsurance they can purchase.

• For real property, fire is still the number one peril, followed by wind and hail. (Real property includes land and structures that sit on the land, but not the personal or business property included on the land or in the structures.)

• Companies have the ability to stop writing new coverage policies.

One other item of note: In 1937, Kansas was the first state to have laws regulating rate adjustments. Statutes say the adjustments must be “adequate, not excessive and not unfairly discriminatory.” Many other states have copied this statute language for their own use.

We Kansans have seen our share of turbulent weather during the past few years, and many of us with property and casualty insurance have also seen our insurance companies come through with claim settlements because of that weather. It’s important to remember that the companies have to make sure they can pay those claims, and they have to maintain financial regulations that require them to keep a certain cash balance. Those factors also play into the adjustment of premiums as well.

If you have questions about your premium notices, you can always call our Consumer Assistance Hotline (in Kansas), 800-432-2484. For tips on lowering your premiums, check our website, www.ksinsurance.org, and download booklets such as our “Kansas Homeowners and Renters Insurance and Shopper’s Guide” and our “Kansas Auto Insurance and Shopper’s Guide.”


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