FARMINGTON — Insurance rates have increased for Farmington, but not as much as for some other Maine towns, the Selectboard was told at its meeting Oct. 10.
There was an initial rate increase of 14.7% which went up to about 15.5% with the purchase of terrorism coverage, Kyes Insurance President Flint Christie noted.
Kyes Insurance has offices in Farmington, Livermore Falls and Skowhegan.
“That is one of the better increases of the towns and schools we insure,” Christie stated. “Around the state we have 52 towns and schools we insure that come up [for renewal] July 1. We have some other ones that come up on different dates like yours. Overall we write close to 100 municipal accounts.”
Farmington’s rate increase is on the low end of numbers Christie has seen. He estimated the average increase was 20-25%, due to a number of reasons.
Auto insurance is out of control, he noted. “There isn’t much we can do about it,” Christie stated. “Costs of materials, cost of vehicles have increased exponentially. The sensors in vehicles, cost of repair, cost of labor. The time it takes to repair a vehicle has increased. Insurers are having a hard time keeping up with it.”
In the last couple years, the time from a loss until the vehicle was returned to the customer has gone from 51 days to 82 days, Christie said. Repair costs have at least doubled in that time, it takes three to four months to get an appointment at the shop, parts are super expensive and the parts ordered don’t always fit – extending the length of time a rental is needed, he noted.
Property insurance has also increased, Christie stated. “The cost of lumber, copper, steel, every component of building a property has increased.”
He noted lumber prices have started to come down, but will probably never return to what they once were. Contractor availability to do the work and catastrophic losses being seen across the country from hurricanes, flooding and hail storms are factors, Christie said.
Nuclear verdicts [the astronomical settlements juries are awarding] and the expense to defend lawsuits – even when won – are other factors, he stated.
Another component is reinsurance [companies buying a higher level of insurance from another company], Christie noted.
“The company you are with will accept the first $5 million of any major loss, they then go out and buy insurance to pay for the next $95 million up to $100 million,” Christie said. “When you have a catastrophic loss like the one in Vermont, have a $150 million to $250 million claim that is over the $100 million, that comes out of the company’s own reserve. So they are getting double hit with reinsurance costs that are out of control.”
All of that gets passed on to the customer, he noted.
This is the first time in Christie’s 31 years in insurance that he has seen companies going out of business because they can’t keep up with the claims coming in. Many companies are trying to shrink, reduce the number of policies they carry in Maine, he noted.
“[Farmington’s] rates weren’t that bad,” Christie said. Buildings coverage usually increases yearly to keep up with cost of materials, construction, etc., is typically around 4%, he noted. Farmington’s increased 8%, the average is about 12% now, he stated.
“Overall you performed well as a town,” Christie said. Losses were about $80,000 to $100,000 in claims in the last five years, which isn’t bad, he noted. “Compared to the premiums you put in, that puts you at 25% loss versus premium.” he stated. “Companies like to see that around 40%. Anything over 40%, they are losing money.”
Farmington’s property rate is really low, ten cents per $1,000, Christie noted. Most carriers are at 20-25 cents per $1,000, he said.
When asked if Farmington was in a pool, Christie said the town is part of the municipal classification of risk, not in a pool. “If you perform better than say your neighbor does, you are going to get a better rate,” he noted. “You have good buildings, you have maintained them, you have few claims and those things all matter.”
“I know it seems bad, but from where I sit it is actually not too bad, it is pretty good,” Christie noted. “I know that isn’t what you wanted to hear. I think it will turn around. It will be another year or two of this.”
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