Wisconsin Insurance Rates Likely Not Impacted by Hurricane Katrina

This year, businesses and consumers will help insurers pay for last year’s estimated $57.6 billion in storm-related losses such as Hurricane Katrina through higher property and casualty insurance policy rates, the Milwaukee Journal Sentinel reported.

How will these disasters impact rates in Wisconsin, where weather-related disasters seldom occur?

Chief Economist for the Insurance Information Institute Robert Hartwig predicts that rates will soar 50 to 100 percent this year in specialty markets, such as boats and oil rigs and will jump 30 to 40 percent in coastal areas, 10 to 20 percent in coastal states.

In Midwestern states, such as Wisconsin, Hartwig believes rates will rise only about 5 percent.

Hartwig said, “In the northern half of the states, rate increases will be minimal. But in areas prone to hurricane-related risks, it’s likely that insurance will rise substantially, probably for several years.”

Hartwig added that the cost of reinsurance–those national and international firms that cover insurers’ extraordinary losses–will have an impact as well.

Wisconsin residents could feel the impact of hurricane damage claims if reinsurers negotiate higher rates with the insurance companies, said Eileen Mallow, Wisconsin assistant deputy commissioner of insurance. But with more than 200 insurers in Wisconsin, competition will moderate any hurricane damage costs that insurers might try to pass through to local policyholders, she said.

“It’s a business practice that they keep their premiums low, and we have consistently been, if not the least expensive, very close to the least expensive in terms of homeowners insurance,” Mallow said.

The National Association of Insurance Commissioners’ data supports this premise. In 2002, the latest available year for state rankings, the average U.S. homeowners policy was $593, while the average Wisconsin policy was $340, the regulatory group’s figures show.

Madison, Wisconsin-based American Family Insurance Co., with about 25 percent of Wisconsin’s homeowner market, did raise rates an average 0.5 percent last year, but also issued discounts of 3 to 13 percent to claim-free customers, spokesman Steve Witmer said.

Wisconsin residents due for a hefty insurance rate increase will know it in advance thanks to a state law that requires insurers to give 60 days warning if premiums are going to rise more than 25 percent, Mallow said.

“Which gives you, the consumer, lots of time to contact the 200-some other companies writing that line of business in Wisconsin and find someone who’s going to give you a better deal,” she said.

Topics Catastrophe Natural Disasters Hurricane Wisconsin