Homeowners Rates on Rise

Homeowners insurance rates have risen by average of 8 percent nationwide in 2002 due to an extraordinary number of catastrophes, the high cost of home repairs and excessive jury awards in mold cases, according to a new report by the Insurance Information Institute (I.I.I.). A 9 percent increase is projected for 2003. During the 1990s, the frequency and severity of catastrophes started increasing, and over the past 12 years, insurers paid out more than $100 billion in catastrophe-related losses—about $700 million per month—significantly more than in previous decades. Homeowners insurance rates in many parts of the country continue to rise because of the extraordinary costs associated with paying these claims. In fact, virtually every part of the country is now at risk for billion dollar disasters. According to the report, homeowners’ insurers over the past decade paid out $1.18 in losses and expenses for every $1 they earned in premiums. In 2001 alone, homeowners insurers paid out $8.9 billion more in losses and expenses than they received in premiums, the second worst year on record (1992, the year of Hurricane Andrew, produced losses of $11.5 billion). Losses in homeowners insurance over the past three years are estimated at $19 billion, rivaling the $20.3 billion in insured property losses from the Sept. 11 terrorist attack. The I.I.I. noted that home repair and rebuilding costs continue to rise, which is a key factor for rising homeowners’ insurance rates. In addition, the emergence of mold claims is a dominant cost driver in some states. Mold claims—which were virtually unheard of just a few years ago—cost homeowners insurers more than $1 billion dollars last year, approximately five times the cost in 2000. The report also showed that the average cost of insuring cars is also expected to increase—by 8.5 percent for 2002 and 9 percent for 2003. Rising medical costs, sharply higher vehicle repair costs and soaring jury awards in vehicular liability cases were cited as reasons for higher auto insurance rates. In some states, fraud and abuse are also pushing up the cost of auto insurance.

Topics Trends Pricing Trends Homeowners