E & O INSURANCE AND THE ECONOMY

With the start of the New Year comes renewal time for insurance policies here in my office.  

It was with some surprise that I took delivery of a certified letter today from my E & O carrier, AIG, (remember them? ) stating that my E & O policy will be increasing by 125% over last year's cost. Why you may ask?  Well let me reiterate directly from the letter delivered to me:

Dear Policyholder:

"This letter is to inform you that the above captioned policy may be renewed with an increase in the expiring premium from $___________ to an amount not to exceed $_______________.   Please be advised that the reason for this action is due to loss experience and market conditions on this class of business. "

The actual amount of the increase is exactly 125%. So now, let me make sure I understand this statement. Loss experience I would guess is due to some defalcations and market conditions would be due to the fact that the economy, particularly the real estate industry, is in the dumps.   I can appreciate the fact that they have had to pay out claims due to defalcation and yes, even can understand a slight increase due to that.  What I don't get though is why they would increase the policy holder's premium due to "market conditions" when they know full well that the real estate industry as a whole is suffering through this economic downturn much more than most other industries. 

It is difficult enough for those of us who choose to remain in the real estate title industry as small independent agents, not part of ABA's or members of some other type of partnerships which undermine the integrity of the industry, to remain afloat in today's economic climate.

Too, given the fact that AIG started the ball rolling with the government bail-outs we are all too familier with by now, I would think that they would do whatever they could to try to keep our cost down, not raise them in a time when we could barely make the premium payments last year, since we members of the general public through our tax dollars and those tax dollars of our children and grandchildren bailed them out of their hole!! 

And, just because I'm curious; what how much of the bailout monies were given to your business? Mine was exactly ZERO DOLLARS !! However, the cost of my unemployment insurance went up by more than triple. Not because I laid anyone off, but because my state's coffers are running dry, so local business had to pick up the tab, whether or not they contributed to the drain on the funds. 

 So, what is a small independent title agent to do? The only thing we can do; pay the piper!! Who will suffer as a result? The consumer of course!  For every increase in our day to day operational costs there has to be a corresponding cost increase for our services which must be passed on to the consumer, thus making it even more difficult to stay competitive.

For now we can only hope that the cost of our Fidelity and Surety Bonds don't increase by 125% too, that the cost of other day to expenses stays somewhat the same as has been in the last year and that we won't be forced to "price ourselves out" of the ever shrinking market available to small independent title agents.

I really appreiciate the opportunity to rant, and welcome your comments.

Charlene Perry

The Preferred Title Group, Inc.