Shrinkflation and Insurance
We are subject to "Shrinkflation" in our lives on a daily basis. What is Shrinkflation? Notice that a quart of ice cream is no longer a quart? Basically "Shrinkflation" is the process of shrinking size, quantity, or quality of a product and leaving the price with little or very slight increases.
What does this have to do with insurance and how are does this apply to your insurance coverage?
Shrinkflation is very apparent when we speak to the Homeowners Insurance policy. Let me give you a brief example:
Around 1999 we saw a big spike in mold claims on the homeowners insurance policies. Carriers were blindsided by these claims and basically had not accounted for these types of claims in their processes of setting rates. There were billions of dollars in losses and a lot of carriers temporarily stopped writing new policies. Prior to 2003 most all companies wrote the same types of policies for home insurance. So really, you were getting the same product regardless of where or whom you purchased it from. The differences were in price and service from that particular company and/or agency that you dealt with.
That has changed!
Insurance companies can now write their own policy, they can adopt one of the standardized policies and they can change the definitions of coverages in each.
Recently, I received a solicitation from another agent telling me that he could insure my home for $1300/year. I knew it wasn't true; We represent the same company that he offered me this unusually low quote. The information used to rate my house was completely incorrect which generated this low premium - actually most were incorrect.
Another tactic is to offer you an unusually low quote on an inferior product. Since there is no uniformity in the home product any longer, agencies can offer these stripped down policies for a lower price. I'm not talking about minor changes to the product; I'm speaking to MAJOR changes to the policy such as removing coverage for water leaks, etc.
There are plenty of good products available and it is important that you have a relationship with a good independent agency that has multiple markets (more options for you) and ask the tough questions.
Don't purchase a pint of coverage when it seems like such a good deal because it comes in a quart container!
I hope you find this helpful.