Consumers Say 2002 Home Cover Cost Up 13 Pct.
By Mark E. Ruquet
NU Online News Service, April 22, 2:39 p.m. EDT?A Consumer Federation of America survey has found homeowners insurance prices in the nation, on average, rose 13 percent last year, with some states experiencing what the group said were excessive increases.
J. Robert Hunter, the Washington, D.C.-based association's director of insurance and a former Texas insurance commissioner, said that Iowa and Texas both reported surprising increases of 33 and 57 percent, which he said are "dramatic increases" and could be the result of price gouging on the part of companies.
"I'm not surprised that this is taking place during this cycle," said Mr. Hunter in an interview with the National Underwriter. "In some states there is some overreaching [by companies]. In cyclical moments, either they are over-reserving or they just go berserk looking for padded, high profits for their company, or they just fear the future."
He said state insurance regulators should be "strenuously" looking at these rates, especially when they rise too fast or too radically, and should be asking companies to explain what is occurring.
The survey was conducted by mail with letters to the state's insurance commissioners asking for comment on homeowners insurance rates and the reason for increases for 1999 through 2002. The surveys were sent out in 2001 and 2003. Forty states replied to the first survey and 33 states replied to the most recent request, CFA said.
The results show a steady increase in rates from 1999, when rates rose a median 3 percent, to 4 percent in 2000, 7 percent in 2001, and a jump to 13 percent in 2002, the Federation said.
CFA noted that a few of the states have undertaken reviews of the market, including Texas, which issued a report earlier this year saying rate increases are "excessive" by 25 percent.
Eleven insurance departments said the leading reason for rate increases last year was mold damage claims. Ten states said catastrophe loss was the major reason for increases, followed by five states that reported decreases in investment income as the leading cause.
Mr. Hunter said he was surprised that terrorism and litigation did not assume a bigger role as the reason for the increases. He noted that these issues are often talked about by insurers as major concerns affecting their industry.
He was also critical of states that did not answer the survey, noting that as public services they should be explaining what is going on in their states. Mr. Hunter said he followed up with those states that did not respond and would release amended data if he receives enough responses. He added that West Virginia replied to the survey after its release.
Neither Illinois nor Michigan, two of the 10 states where insurers wrote more than $10 million in direct premium in 2000, replied to the survey. New York, Ohio and Pennsylvania did not reply to the 2003 survey, CFA said.
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