Insurance Companies and Roofs

Luxury RoofOn October 1, I had the pleasure of speaking to an actuary at a nationwide insurance agency.  I wanted to get a better understanding of how insurance agencies determine discounts on roofs.  Unfortunately, the company did not want to be identified, as to not promote or support any product over another, so they will remain anonymous and not get credit for this post!  I thank you anyway, though!

Here is a synopsis of our conversation:

What process do you go through to give a discount to a particular product?

It's really a three pronged approach – marketing, products, and pricing – there are areas within the company that work on something like that.  How would you market it, how do you build it, what is the pricing for it.  That’s how they develop any discount.

For a roofing material in particular, when something new is developed you don't have any historical experience, so you have to use industry information – like simulated tests made for storms, wind, hail, etc.  From there, you track your experience going forward and adjust the discount from there.

It's a catch 22 though because newer products that perform better usually cost more – so we have to spend more to replace them.

Why do insurance companies give discounts on certain roofing materials?

To reflect the risk, exposure properly.  If there is truly a lower cost, then insurance companies should charge less.  A lower cost, fewer loses, we are going out and inspecting fewer losses therefore it gets a discount.  There is a marketing aspect to it as well - if more roofs have them and we offer a discount on them, then people may be more attracted to the insurance. 

What does an insurance company look for when considering giving a discount for a certain roofing product?

  • Impact resistance
  • Fire retardant material
  • any type of warranties and guarantee
  • Slope of the roof – a flat roof retains water and is going to leak.  A flat roof is a much higher cost
  • Wind resistance – depends on construction standards.

What certifications does the product have to have? 

When evaluating a roofing product, an insurance company will look at roofing industry type reports, like UL Class 3, Class 4.  Underwriters gather as much information as they can, but really the process is a lot more ad hoc – so and so contacts the insurance company about wanting a discount on the roof and it's pushed from there.

Are roofs discounted throughout the country?

There's a geographic aspect to it.  For example, impact resistance roofs are needed in hail prone state, but in southwestern states where hail is less of an issue – they have a tile discount – because it lasts longer than asphalt does with that heat. Different materials perform better in certain areas.

Do you have any questions that you would like to ask an actuary at an insurance company about our luxury roof?  If so, please feel free to leave a comment below whether it's about our plastic slate roof or our fake cedar shake roofing product.

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