Severe Weather Conditions Don’t Batter Reinsurers as 2014 Q1 Trends Emerge

Reinsurers must be smiling a lot as Q1 reports for this year show up. Most insurers seem set to gain from uncompromised capital and manageable claim volumes. Underwriting teams have performed rather well with 2014 being a remarkably silent year in terms of catastrophes. With no major natural disasters so far and no discouraging weather forecasts, the immediate future looks secure for carriers.

Staying Positive with a Guarded Approach

After 2012, ever since the likes of Sandy battered the coastal regions, river/ocean dwellings and businesses have been spared from permanent damage. However, it would be wrong to state that the entire industry hasn’t seen any challenges in the first quarter of 2014.

As market optimism gained momentum after the Holidays, winter storms started rolling in. With the onset of 2014, a polar vortex gripped the nation, bringing freezing temperatures to most states. This was interpreted as a part of a global weather pattern since European nations too suffered from winter storms and flooding (very severe in the UK). However, the reinsurance industry isn't complaining much about these events.

Most businesses that seek comprehensive coverage against various types of natural disasters usually pay more-than-average premiums. Further, the smaller insurers have typically stayed away from taking upon too much of reinsurance risks. The bigger, more established insurers exposed to claims surfacing due to snowstorms have been able to absorb the shock.

Yes, insurers have received storm related claims but the overall situations remains manageable for most insurers. Most claims haven’t sought compensation for total overhauls or large scale construction. Most properties suffered partial damages. Common damages include collapsed roofs, burst sewage lines, power failures, and auto accidents but with little loss of life or excessive damage to property. Many needed exhaustive repairs but little rebuilding. This ensured that carriers’ bottom line wasn’t dented. Further, reinsurers are exposed for a part of the total compensation only.

Making Sense of All This

The significance of this upbeat trend assumes greater importance if the severity of cold and snowfall-caused losses are taken into consideration. The losses are at their highest since 1980. The entire nation has been suffering an unexpectedly long and brutal winter. This has given rise to more commercial and personal claims. Still, the industry at large remains positive, finding security in its capital reserves. The insurers’ buffer has been further boosted by better consumer activity in the first quarter.

Agents are being increasingly questioned by consumers who have had a recent, good run on their credit histories. Reinsured mortgages are being sanctioned with lesser apprehensions. This is creating a cycle of positivity—a better capital position is allowing insurers to take upon more risk which is further influencing better consumer interest. Even the catastrophe bonds that provide some level of reinsurance protection against losses caused by winter storms are expected to deliver, not causing any principal loss.

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Homes with Sustainable Features are More Popular than Ever

What are the features that buyers look for when they shop around for their new home? Do they really think that sustainability makes a home more attractive?

Yes. A recent report published by the National Association of Realtors claims that sustainability improves the saleability of a home. In fact, both young and old buyers are looking for homes that score high in the sustainability department.

But which features top the buyer's list of preferences?

The sustainable features that are particularly important to buyers are energy efficiency, eco-friendliness, and commuting costs. Almost 32% buyers consider commuting costs while buying a home and 9% buyers insist that the home should have solar panels installed on it. Heating and cooling costs bother 36% buyers. Over 40% buyers look for energy efficient appliances and lighting. At least 9% buyers insist that the home should have eco-friendly community features.

The survey studied the behavior of buyers and sellers and broke down the trends by the respective generation of each respondent.

The questions were aimed at discovering which generation the majority of buyers belonged to and what size homes were being bought by them. It also tried to assess the popularity of multi-generational homes in today's housing market.

Methodology

The survey consisted of 122 questions. The questionnaire was sent to a random sample of 148,011 people who recently bought homes - that is between July 2012 and June 2013. A total of 8,767 people participated in the survey.

Here are the findings.

Over 60% home buyers belong to Gen X and Gen Y. Younger people account for 16% of the buyers whereas the older generation accounts for 14%. Only around 9% people belonging to the Silent Generation bought homes during this period.

Almost 76% of the first time home buyers belong to Gen Y. As you can imagine, there aren't many first-time buyers among the older generation. Only 2% buyers belonging to the Silent generation (born before 1946) are first time buyers.

Interestingly, buyers of all age groups start their home buying process online. They look up properties for sale. Buyers belonging to Gen Y also search online to find out more about the process of buying a home.

People born during World War II (Silent Generation) hire an agent or a broker to help them find their dream home.

Over 50% of Gen X and Gen Y buyers used their mobile phone or tablet to help them find that perfect home. In fact, 26% Gen Y and 22% Gen X buyers purchased a home they found via their mobile devices.

Younger buyers mostly hired agents recommended by their friends, family or neighbors. Older buyers were far more interested in hiring an agent they had worked with in the past.

Almost 88% buyers got a mortgage to buy their home. While almost all buyers belonging to Gen Y got financing to purchase their home, only around half of Silent Generation buyers got financing.

Seller profile

Almost 29% of recent sellers belong to Gen X. And younger sellers tend to hire the same broker or agent for their home purchase.

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Tips to Help Agents Design an Effective Marketing Strategy

As a real estate agent, you spend a lot of time marketing your clients' listings. But do you also spend time marketing yourself? If you do not market yourself properly, people will not want to work with you. They will not even realize that you are a real estate agent.

How to market yourself?

Marketing has several facets and you need to take care of every one of them. Here are some tips and ideas to help you design a sound marketing strategy for your real estate business.

Marketing yourself isn't much different from marketing your clients' listings. In both cases, you will be employing the same techniques.

Effective marketing has three component:

Finding the right audience

 You should know who your target audience is. If you are trying to sell a listing, you should know where the buyers are. Your marketing efforts should be targeted at them. For example, there is no point in trying to sell the listing to a family that has just moved into its brand new home. They will have absolutely no interest in buying. You can figure out who your target audience is by following these simple tips. The target audience depends upon the kind of home you are trying to sell. If you are trying to sell a starter home, you should target newly married couples who live in the neighborhood. If you are marketing a high end luxury home, you should target the affluent sections of the society. Selling a big ticket home to people who can't afford to buy it is a waste of time.

If you are trying to market yourself, you should focus on people living in the towns where you provide your service. As you can see, it is relatively simpler.

Choose the right medium

Choosing the right medium to market your listings and service is crucial. Think about marketing and perhaps the first thing that comes to your mind is the internet. While online marketing is highly effective, it is equally competitive.

In order to get the desired results, you need to design an effective online marketing strategy. When it comes to online marketing, establishing a presence on social media is imperative. You should also consider direct email. If you run a website, encourage people to subscribe to your newsletter. The beauty of this method is that it is highly targeted. The people who subscribe to your email are those who actually want to hear from you.

You should also consider advertising your listing in magazines. If the magazine reaches your target audience, it makes sense to promote your listing / service there.

If you do not choose the right medium, your marketing efforts won’t produce the desired results.

Get your message across

So, you have identified your target audience. You have also decided how to reach them. Now you have to get your message across. If your message is not spot on, all of your efforts will fail.

Your message should directly speak to the target. Don't use general language in your messages. Be specific. You should also ensure that your message encourages people to take the desired action. This is crucial for effective marketing.

Use these tips and ideas every time you launch a marketing campaign to get the best return on your investments.

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Why Real Estate Agents Can't Ignore Public Relations

Public relations play an important role in brand building. However, in the real estate industry only big brands seem to care about PR. Most agents and small brokerage firms still don't have a well-defined public relations strategy. This could be due to a scarcity of resources. Few agents can spend thousands of dollars on their PR machinery. There are also agents who simply don't understand why public relations are important.

All agents should have a public relations strategy in place. To start with, you need to do whatever you can to position yourself as an authority on all matters related to real estate. You should also gain the support of your community. Enjoying sufficient community support is crucial to building your brand. A well-designed public relations strategy will help you accomplish both.

The two pillars of your public relations strategy are relationships and consistency.

You must make a consistent effort to publicize your name. Some agents make an initial effort, but as they get busy, they put their PR efforts on the backburner.

Building relations with media outlets

Media outlets are a great platform to reach out to potential clients. Building relations with media outlets might take time, but it is well-worth your efforts.

Here's how to get started:

Decide which media outlets you want to be quoted in. You should consider websites as well as local media outlets. The local newspaper, for example, is a great platform to bring attention to your service. You should also try to get the attention of media outlets focusing on the real estate industry.

If you can get quoted in a newspaper report, you will be able to show potential clients in your neighborhood that you are an expert on real estate. Getting quoted in a real estate industry outlet will substantially increase your credibility overnight.

When you get quoted in a news story on a real estate website that gets tens of thousands of visitors a day, you get to reach agents and potential clients across the country. This leads to referrals and sales.

Once you have identified the media outlets in which you want to be featured, you should reach out to them. Tell them why they should get tips and advice from you. Send an email each month with interesting information and story ideas. You will probably not hear from them, but don't give up. Building relationships take time. Your objective is to get quoted in a local story, and by constantly sending story ideas to media editors and reporters, you are making your job easier.

Gather the support of your community

A lot of agents make valuable contributions to their community, but they keep mum about it. Don't commit that mistake. If you're involved in a cause, you should write a press release about it.

The press release should be about your cause. It should also include one or two quotes from you. Your goal is to draw attention to your service by showing your association with the cause. Send the release to reporters and editors in your contacts list.

Many national media outlets take news stories from local media outlets. So if your PR efforts are consistent, over time you will be getting calls from news reporters and editors all over the country asking for your opinion on important industry related matters. That is when things get really interesting.

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Severe Winter to Squeeze the Earnings of Property Insurers

Harsh weather conditions cause property damages and financial losses. For Americans, this year's winter was one of the worst in recent memory. In fact, winter storms brought many parts of the country to a standstill. Administrators had a tough time keeping the roads clear for vehicles and pedestrians during the winter season. In fact, officials across the country are still paying the bills.

In Atlanta, the cleanup costs amounted to $13.5 million. The situation was even worse in many other parts of the country.

Severe winter also hurt property insurer's earnings during the first quarter. In fact, this year's winter was probably one of the costliest in the country since 1980. Insured losses during the period were more than 1.5 billion USD.

Besides causing major property losses, the adverse winter affected several businesses. Many companies had to deal with supply chain issues and business disruptions. If you add sinkholes, train derailments and mudslides, it is not hard to see that the first quarter loss is above average.

Winter isn't the only cause of property damage in the US. The Atlantic hurricane season is even more dangerous. Although weather forecasters expect this year's hurricane season to be less active, you never know until the storms hit the shore.

Several independent studies note that property insurer's net income during this quarter is likely to be challenged. However, since the market for securities is strong, they should be able to sail through.

This year's severe weather upset business operations for several companies throughout the country. Severe weather conditions pose a continuous threat to the bottom lines of many businesses in the US.

FM Global, unarguably one of the biggest business property insurers in the world, recently conducted a poll of the workforce in the US. Over 70% of the full-time workers in the US said that this year's winter was the worst they had experienced in five years. More than 25% employees said that their company had been hit by the weather. Unfortunately, most of them didn't have any emergency plans to continue their operation during the hostile weather conditions.

However, winter-related financial losses have caused many companies to rethink their strategies and change the way they do business. That is a welcome move because the weather is quite unpredictable and hence companies should avoid complacency.

Harsh winter can cause property damage and financial loss. It may also affect the organization's competitiveness. Businesses need to be resilient and should be able to deal with all weather-related emergencies.

Businesses can prevent property damage in winter by following these guidelines.

·         Don't expect the winter to be lenient. You should plan as though freeze-ups are going to be certain. This is imperative even if your company headquarters is located in a warmer climate where severe drops in temperatures are unlikely.

·         Every company should have some employees to patrol buildings during the winter season. They should look for cold spots, large leaks and structural damages.

·         If the operations need to be shut down, there should still be procedures for adequate heating. This is imperative. If the company fails to heat the premises adequately, they will not be able to claim damages from their insurance companies.

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Flood Insurance Market: Greater Affordability and Uniformity Underway

Government’s National Flood Insurance Program might be in the doldrums, but a few steps are being undertaken to ensure that coastal communities get some relief. The Senate recently passed a bill that will stimulate more flood insurance reforms. At the heart of these reforms lies the limitation on premium hikes. These efforts don’t clearly address the actual reasons that were causing the premiums to jump, but consumers will be happier with the news of government capping on premiums.

Menendez-Grimm Bill

Agents in the coastal community insurance niche have been repeatedly voicing their concerns about limited benefits and almost negligent scope for offering financial sops. This insurance marketplace remains highly pessimistic with minimal consumer addition. Now, some degree of grandfathering has been allowed in the policies. This is largely applicable to communities with updated flood maps. Now, agents will be able to offer subsidies along with standard coverage as a result of the Menendez-Grimm bill. Other changes that this Bill brings to the flood insurance marketplace include:

Overall Affordability

The Bill seeks to make the entire flood insurance marketplace more uniform and affordable. Overpriced policies, i.e. those with an annual premium greater than 1% of the total coverage amount, will be gradually eradicated.

Streamlining Property Sales

Until now, coastal homebuyers were paying the full risk rate at the time of buying homes. Now, pre-FIRM properties will be exempted from this provision. Property owners have been wondering about how to prevent the steep decline in their property valuations. Many coastal properties have been rendered unfit for sale due to this environment. Now, the entire marketplace will breathe easy. This also means better equality for home buyers and sellers.

Firewalling Premium Rises

FEMA has been asked not to increase the annual rates beyond a certain value—the limitation ranges between 15 and 18 percent. This is welcome news for agents as consumers interested in individual policies are often questioned about the recent, unwarranted hikes.

Reverting to Good Old Grandfathering

Grandfathering has been present in many of the traditional insurance markets, including the healthcare sector. However, coastal community properties didn’t enjoy this advantage. Homeowners were left with two expensive choices—either pay higher rates or take upon large scale property restructuring. With grandfathering kicking in and premiums with a defined cap, homeowners don’t need to fret about rising out-of-pocket expenses.

Widespread Refunding

Some folks have complained about a little clarity about the refund procedure for homeowners who had unconsciously overpaid. Until now, FEMA didn’t provide any clarity on this issue. Now, overpaid premiums will be adjusted in the form of nationwide refunds.

Better Communication: More Outreach & Transparency

Map determinations get more assistance to ensure that communities and policyholders abiding by the regulations are benefited. Agents have often struggled to advise consumers on how to finance the appeal. With more appeal reimbursements, homeowners will be repaid for their flood risk related knowledge. The flood insurance niche has been somewhat opaque. Usually, agents have been at the forefront of bearing consumer queries with little clarity from the state or federal government. Now, prospective policyholders can demand answers for flood mapping and hikes in rates from clearly defined organizations. With more information available about flood risks and map appeals processes, policyholders will feel more secure.

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What Does the Future Hold for Independent Mortgage Brokers?

Market analysts have been speculating about the imminent death of the mortgage broker for a while. Many banks suffered huge losses when the markets crashed in 2008. They also had to deal with low interest rates and a slow economy. As a result, many of them quickly left the marketplace. At least some of them have started working directly with the homebuyer.

Does that mean that the days of the mortgage broker are numbered? Yes and no.

There has been a gradual decline in the number of mortgage brokers over the last few years. Their numbers may drop even further during the coming years. This, however, doesn't mean that all independent brokers will have to quit the market soon. That is unlikely to happen.

What does the mortgage broker do?

Mortgage brokers act as the middlemen between lenders and home buyers. However, the new rules issued by the Consumer Financial Protection Bureau may force many independent brokers to quit the business.

The new rules prohibit mortgage brokers from placing homebuyers in costlier mortgages with the sole objective of earning a higher commission. They will also prevent the broker from receiving commission from both the lender and the borrower. While brokers are not exactly happy with this development, consumers will definitely welcome this move because it makes working with the broker safer.

However, this many force many brokers to quit the business. And if that happens, the consumer may find it difficult to shop for a mortgage. Brokers make the whole business of getting a mortgage easier. They understand the market and know the best deals and rates. They have access to banks.

If there are no brokers, homebuyers will have to go from lender to lender until they find the best deal. Getting a home loan is already difficult because it requires a lot of documentation. And if the broker vanishes from the scene, the process makes even longer. This will affect the borrower in many ways.

It is true that they can log on to the mortgage shopping sites. However, most of these websites only provide referrals. They don't provide enough information for the borrower to compare rates.

Working with a mortgage broker is risky. Many unscrupulous brokers place borrowers in risky mortgages. They are only concerned with their commission. In fact, these brokers have even been blamed for the crash of the housing sector.

However, now that many of these greedy brokers have quit the sector, the new rules eliminate most of the risks associated with working as a broker. Now for the borrower the biggest challenge is finding a mortgage broker who has access to a huge number of lenders.

Over the last few years, several big banks in the US and Canada announced that they would no longer work with independent brokers. Some of these banks even went to the extent of saying that loans originated by their loan officers performed much better.

Numbers don't lie
 

Independent brokers have been quitting the industry for a while. That was mainly due to the crash of the housing sector.

While in 2006, The National Association of Mortgage Brokers had around 25,000 members, their number fell to nearly 5,000 in 2013. This drop in their number has also reduced their market share. During the last 2 years, independent brokers originated only about 10% mortgages. They accounted for nearly 30% of the mortgage originations during the period between 2004 and 2006.

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How Walkability Helps in Selling Real Estate

Walkability has suddenly become a buzzword. It is a broad topic that involves health, economics, community, demographics, and the environment. It might seem complicated, but it is just common sense.

Homes that have easy access to shops, services, and offices by foot tend to sell for a price premium but that is hardly surprising. When people have convenient access to service areas, they get to save a lot of money on transportation. They also get to save time. And when they walk their health improves. When more people walk there will be fewer vehicles on the road. As you can see, this is good for the environment as well.

In other words, walkability makes a community more livable and eco-friendly. Developers are keen to provide walkability. When they build communities where people don't have to drive, they can charge a higher price.

People now want to walk to work. They also want to live in bustling townships that have everything they need within walking distance. Walk score, a new metric that developers now use to sell their properties, is a measure of services available within a certain distance. Homes that are close to food stores, transit and government offices tend to have a walk score of 90 percent or above. Unfortunately, this metric doesn't consider the quality of the walk. A short walk along a dark underpass is much less pleasant than a relatively longer walk along a tree-lined street with beautiful homes and shops.

Here are a few things builders need to take into account when they build homes that boast of walkability.

Future proof the homes

When walkable homes are built with care and craft, their value will continue to appreciate. The key is building communities where people want to live and spend time.

Be street smart

The sidewalks should be at least 5 feet wide. If they are narrower, they won't let couples stroll.

Builders interested in creating long time value now even consider building streets that are lined on either side by trees. If budget permits go for it and when choosing trees mix them up.

Encourage interaction

When you build public spaces, you need to look at them as outdoor living spaces that provide a sense of privacy and enclosure. They must be configured in such a way that stores should face each other. Also include large porches in the front so that families can interact with their neighbors. Porches that are too close to sidewalks need to be built with special care. These kinds of porches should be elevated so that homeowners feel comfortable.

Choose tenants wisely

While choosing tenants for the stores, make sure that they complement each other. For example, a bookstore, a clothes store, a restaurant and a coffee shop contribute to one another and add to the amenities.

The growth of the walk to work culture

In cities that have a well-defined work culture, more and more people are looking for properties that are within walking distance of their workplace. These properties command a price premium and their value tend to appreciate over time.

While trying to develop walkability, real estate professionals and builders must not compromise on aesthetics. Simply put, walkability helps sell homes.

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