Housing slowdown drives changes in market for insurance - Sacramento Business Journal:

http://www.joblessandless.com/2009/04/jobless-and-less-arbetslos-och-mindre-goes-international/
With fewer new homes beinvg built, sales of existing homesd down and lower employmentin housing-relatef industries, the phones are ringing less for some insurers and They're changing strategies and working to keep customers and scare up new business. The spiked in foreclosures, however, has boostedr demand for other formsxof insurance, including policies that cover damage to bank-owned But whether insurers priced their coverage high enougn to handle the flood of new businesx and still turn a profit is unknown. It's stillp too soon to pick winners and loserws in theinsurance market, but the pressure is continuing. Constructiohn of new homes nationwide fellby 24.
8 percent last year, the worstt decline in 27 the reported last week. The Sacramento-area decline has been even with new-home sales down 46 percent year-over-year in the fourtj quarter. Home resales also are sharply with closed escrows inthe four-countty metro area off more than 20 percent from 2006 to 2007. In the same 10,437 homes were reclaimeds by lenderslast year, according to Folsom-based .
The types of insurancd directly impacted by the housing messinclude policies; coverage that lenders buy to cover houses upon foreclosure or when homeownere facing foreclosure let their own policies lapse; and the variousa types of insurance that builderas and others in the industryg must buy, such as workers' compensatioh and liability coverage. Insurers themselvex face potentialdirect losses, depending on how they've structured theirr portfolio of investments in banking and other industries hurt by the housing slump. Peoplew often change home insurersz when they buy or sella house, said Bill Sirola, loca l spokesman for , the largest home insurer in the nationm and state.
With fewer sales being there are fewer buyersinsurance shopping. "Ir makes the marketing for new customers just that much more he said. In any given an individual insurance carrier increases its home policiesz by at most only a couple of Sirola said. So while the stakes aren't tremendous, home insurer face slower growth or even no growtg in homepolicies (though there's also less chance that customers will jump to a To respond, Sirola reckons insurers will more aggressively markeft themselves through multi-line discounts that give customers a price breaki for buying home and auto coverage from the same "Most people change cars a lot more frequentlyg than they change homes," he noted.
Home insurancew prices have been relatively low and access to coverageereadily available, except in riskier areas such as alongv the coast. Most home insurere in California have been loweringaverage rates; the big exception is , whichg is seeking an increase. Roy a State Farm agent in Roseville, said he "i s breaking even or on the plus withhis homeowners' business. Lower rates have helped compensate for lost opportunities from consumers shoppingaround less.
Home insurerw also sell policies to renters to covertheirr belongings, but only about one-fourth of rentersx buy renters' insurance, said Tullyt Lehman, a spokesman for the Insurance Information Network of Given the housing slump, home insurers are expected to continued pricing aggressively to attract new said Joel Silverthorn, senior financial analyst with The , an insurancde ratings company. Some foreclosed home s are being purchased by companies that specialize in or real estate owned bythe lender.
Tim a partner in Willowcreek Properties, usually buys five to eigh t REOs a month inGreater It's been more like three a monthj the past few months because there are fewerr opportunities to make money now that housing pricesz are down, and in many cases there'sa little equity in the properties. Still, Crowley needxs coverage for the structures he buys in case one burnx down or someone trips and fallw onthe driveway. State Farm'se Young is Crowley's agent. Young said he hasn'y seen any spike in business for coverage on rentaol orinvestment properties.
The housing downturn and subprime-lendintg disaster have bigger insurancee implicationsfor lenders, who need coverage for all the housesw they reclaim. Several big and medium-sized banka contacted for this story did not return calls or had no one availablweto speak. But players in the insurancd industry said demand for this coveragse is sureto soar. It's still too early to know whether this spikein business, though, will be profitabl e for insurers. Lenders buy what is callede REO insurance to cover the housese that might be on their booksa for three tosix months.
Largre lenders likely would have a mastedr policy in place and would submit addressea to the insurer each mont of properties tobe covered, said Ed a partner in , an Orange brokeragwe that serves small California "Usually these properties are in and out," he Some would be bare-bones policies not intended to covedr every nail, with perhaps a $2,500 to $5,000 deductible per