Chances are Hurricane Isabel will bolster the homeowner insurance industry's argument for yet higher premiums next year.

Isabel could trigger the 41st major disaster the Federal Emergency Management Agency declares this year. National disasters, along with 16 emergencies and 33 federal fire management assistance efforts FEMA also declared this year are getting part of the blame for an average 8 percent hike in homeowners insurance premiums next year, up from the average 7 percent increase policy holders endured in 2002, according to the Insurance Information Institute.

Keep in mind, the figures are averages. In areas where disasters, emergencies and fires occur more often, home owners are all to aware that they have and will continue to suffer much higher increases.

Due to increased catastrophe severity, insurers have paid out more than $100 billion in catastrophe-related losses since 1990, about $700 million per month, says the New York-based institute, a nonprofit insurance information organization sponsored by the property and casualty insurance industry.

Catastrophes include well-known events such as Hurricane Andrew on the East Coast in 1992 and the Northridge earthquake on the West Coast in 1994, but also hundreds of smaller disasters associated with tropical storms, tornadoes, wildfires, hail, ice and snow.

"Homeowners insurance rates in many parts of the country continue to rise because of the extraordinary costs associated with paying these claims," said Robert Hartwig, senior vice president and economist for the institute.

The industry cites a litany of payouts.

Between 1990 and 2002, home insurers paid out, on average, $1.17 in losses and expenses for every $1 they earned in premiums.

In 2002 alone, home insurers paid out $3.5 billion more in losses and expenses than they received in premiums. In 2001, home insurers lost $7.3 billion, the second worst year on record (the highest is 1992, which included Hurricane Andrew and produced losses of $11.5 billion).

Losses in the homeowners insurance line over the past four years (2000 through 2003) are estimated at $17 billion, approaching the level of insured property losses from the September 11 terrorist attack.

But it's not just the disasters.

The industry also blames American Dreamers for demanding ever larger homes -- new or improved -- and the related growing cost of building materials.

Approximately 41 million homeowners added to or improved their homes between 2001 and 2002, the industry says. In 1999, the most recent year for which the insurance industry says annual figures are available, an estimated $25 billion was spent on home improvements.

The Joint Center for Housing at Harvard University actually tracks the number quarterly and says the number is nearly five times as high -- $122.3 billion over the past four quarters, ending in the second quarter this year.

"Part of the increase reflects choices more homeowners are making. People are taking advantage of record low interest rates and are moving into new homes or making additions to their existing homes in near record numbers," he said.

"These upgrades and additions are pushing up insurance costs. People expect their premium to stay the same, but they don't realize they have more house to insure," he added.

Critics, including Americans for Insurance Reform (AIR), argue the industry is making consumers pay for its bad investments and risky policy writing habits.

The economic burden on consumers has come not only in higher premiums, but also in reduced coverage, canceled policies and insurance coverage denials. California's Department of Insurance, for example, reported a 71 percent rise in claims during the past year -- from 1,891 to 3,230 -- submitted by home owners who were denied insurance, had their policies canceled or could not renew their coverage. The department said many complaints even came from people who only made inquiries about their coverage.

The industry says premiums rise more for older homes, homes nearer coasts and natural and weather hazard zones and homes with a insured loss history. Poor credit risks are also likely to pay higher premiums, the industry says.

Newer homes, homes further from hazard zones, homes equipped with security devices and homes with limited insured loss histories cost less to insure. Homeowners with better credit ratings are also likely to pay lower premiums.

Experts also advise:

  • Educate yourself. Learn about current homeowners insurance issues from the California Department of Insurance.
  • Shop early. If you don't have a policy, shop for homeowners insurance before you buy a home. Get a copy of the insurance loss history of any home you plan to buy. Your agent can help. Get the home professionally inspected to seek latent problems that could become insurance claims.
  • Raise deductibles. Higher deductibles reduce your premium costs. Raise them only if you can afford the higher out-of-pocket cost you must pay for certain claims.
  • Shop around. Prices vary from company to company. Standard and Poors and AM Best Co. rate insurers on their financial stability.
  • Upgrade systems. Modernize your heating, plumbing and electrical systems to reduce the risk of fire and water damage and related insurance claims. In certain areas, "safe rooms," earthquake retrofits and other structural bulking-up upgrades also add marketing value when it's time to sell.
  • Increase security. Discounts of 5 percent or more are available for smoke detectors, burglar alarms, dead-bolt locks and security systems. Extra discounts may be available for sophisticated sprinkler systems and monitored fire and security systems. Before you buy, check with your insurer to determine which system is recommended. Also consider the extra layer of protection and value the systems provide even without a discount.
  • Double up. Buy your home and auto policies from the same insurer. Some companies offer discounts for multiple policies.
  • Credit counts. Maintain good credit. Insurers increasingly use credit-based insurance scores to set your premiums, approve or reject your policy request.
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