As I discussed in Part 1 of this post, several risks have emerged in the personal lines market as a result of the 2008 economic downturn. The effect on both individuals and business continues to spread. That’s why it’s critical to recognize how the economic environment affects risk management. Here are some risks that are vital for insurers to monitor:
From abandoned homes in the suburbs to closed retail stores in strip malls along our highways, vacancy rates have been increasing. Vacant homes attract vandals ready to tear out copper wiring and pipes to make a buck, squatters with nowhere else to sleep, and other unwanted visitors who may take up temporary residence and cause further loss or damage.
- Home repairs
While insureds may take the time to shop for a professional to replace the roof, repair the plumbing, or fix the hot water heater, quality may suffer if budgets for such projects are strained and force insureds to take the lowest possible bid just to get the job done. Buyer beware: Many contractors acting as jacks-of-all-trades in need of work may be willing to do a job at a very appealing price.
- Car sharing
It sounds like the perfect idea: People with idle cars can make extra money by renting them out to others who need a car temporarily. Car sharing has surfaced and is raising significant risks for auto owners and insurance carriers. Ride-sharing arrangements, such as peer-to-peer taxi services are also gaining in popularity. Such services match drivers using their own cars with passengers who request a ride through a mobile smartphone application. Most personal auto insurers would want to avoid a claim that results from an accident caused by a driver using a covered vehicle under what amounts to a variation of a rental vehicle arrangement or a taxi cab.
Homeowners and apartment dwellers have resorted to renting spare rooms to help pay the bills and earn extra cash. Some of those new landlords, though, aren’t aware of their maintenance and safety responsibilities, including electrical regulations that pose a fire and shock hazard.
Economy-driven changes to personal lines risks may seem daunting, but awareness of new risk concerns is the first step to mitigating them — and to ongoing improvement in the balance sheet.