Property and Casualty Insurance

With recent issues including natural disasters, mold, terrorism, and market share competition, property and casualty insurance has become more costly and hard to obtain. This aspect of property and casualty insurance is especially true in conventional and government-assisted housing and the commercial markets.

In 2001, the property and casualty insurance industry has posted a $7.9 billion net loss. This property and casualty insurance loss is the first ever net loss, according to the Insurance Services Office, Inc. (ISO) and the National Association of Independent Insurers (NAII). Experts have predicted a return rate for property and casualty insurance at a negative 2.7 per cent, almost 6.5 per cent lower than that of year 2000.

As a result, several property and casualty insurance companies are retrenching. One of the steps they undertook to cut back on their losses is to avoid adding any new policies into their property and casualty insurance.

They have also purposefully stopped updating or renewing their existing property and casualty insurance policies. Furthermore, the premium price of property and casualty insurance policies has increased.

Stated causes of the property and casualty insurance problem

“Mold is Gold” was the headline of one trial lawyer publication. The recent large court decisions against insurers have jeopardized profitability of the property and casualty insurance industry.

The trial courts recognize the invasive mold as the latest household hazard and property and casualty insurance policyholders are getting the most out of their lucrative lawsuits. A well-publicized Texas lawsuit resulted in a $32.1 million decision – good for the owner, bad for the property and casualty insurance industry.

The September 11 event has also negatively impacted the property and casualty insurance industry. It has been reported that September 11-related property and casualty insurance claims total to as high as $70 billion. The same event has also caused the decline of the stock market which added to the downward movement of the property and casualty insurance industry.

The effects of the property and casualty insurance problem

Property and casualty insurance is essential in real estate. The real estate market cannot function properly if property and casualty insurance is not as accessible as it used to or not as affordable as before. Property and casualty insurance coverage is essential because it is an underwriting requirement when you apply for a conventional, government-assisted and commercial mortgage. Lending companies require property and casualty insurance; otherwise the mortgage application will be rejected.

Real estate leans heavily on mortgages to close a great majority of its sales. Without property and casualty insurance, there won’t be any mortgages. As a result, sales in the real estate market will plummet.

Moreover, without property and casualty insurance coverage, homeowners will have a difficult time maintaining their mortgage obligations. This may force lenders to foreclose on the property or subject the homeowners to expensive lender forced-place coverage.