They Say, Hearsay
“Since the insured is the risk and the risk gets reduced after the repairs are made, why would a premium increase? The premium is supposed to be tied to the risk, so please explain. It is illogical to have a rate increase if there is less risk.”

We Say
A common misconception among policyholders is that home repairs should equate to reductions in loss exposure. But risks do not get reduced when repairs are made, because nothing changes with a repair. Risks get reduced only when a structure is rebuilt better than it was before damage occurred. Repairs maintain the status quo; however, that is often not the way a homeowner views it. Insurers have an opportunity here to help customers differentiate between home repairs and structural improvements. The former most often falls into the maintenance category; the latter is about future resiliency and reducing risk. Indeed, making a home less vulnerable to damage can bring about lower premiums but like so many things in life, it is not that simple.

I recall a conversation I had last year with a Floridian incensed that his insurer increased his rates after he replaced his shingle roof with a storm-rated metal one. He fully expected the investment to earn him a significantly lower premium and was shocked to find out the new roof actually increased his rates a bit because, as his insurer explained, if the metal roof was damaged, it would be more costly to repair. While he did get some premium credits in the end because his Hurricane Resistance Rating was upgraded, this true tale illustrates the great divide between customer logic and industry logic, a divide we must somehow bridge so that there are fewer such surprises.