After three years of steep increases, homeowner insurance rates in Montana appear to have leveled off as the economic condition of the industry has improved, state Insurance Commissioner John Morrison said April 15.
Insurance companies are no longer plagued by the untimely combination of high losses and low investment earnings that prompted the big premium jumps that began in 2001, he said.
The state’s largest home insurers (State Farm, Safeco, Farmers and Allstate) have indicated in filings with Morrison’s office that they plan no rate increases this year, he said. Those four companies account for 55 percent of the homeowner policies in Montana.
Morrison, who announced an investigation last June into the large increases, said his office concluded in that process that the higher premiums in 2001, 2002 and early 2003 were in proportion to the financial losses the industry had experienced.
But he’s not taking full credit for what he said is a more stable premium picture. “While I believe we were vigilant in keeping a close eye on rates and making sure companies knew we would be demanding in that way, the primary reason for relief in rates at this time is the competitive pressures of the marketplace,” said Morrison, who also is state auditor.
Some in the industry agreed.
Roger McGlenn, executive director for the Independent Insurance Agents Association of Montana, said the leveling off of premiums is part of a natural cycle in the business.
As losses diminish and investments improve, companies are able to back off on rate increases and perhaps even cut premiums to become more competitive, he said.
“The insurance business has always been cyclical where companies begin making money, so they reduce rates to increase their market share,” McGlenn said.
Morrison said the state’s top insurers had premium increases that were as high as 23 percent in 2001. The following year, increases ranged from 9.4 percent to 32.5 percent. In 2003, State Farm boosted its rate 15.5 percent, and Safeco went up 10.5 percent.
But last year, Farmers and Allstate filed no rate increases and State Farm and Safeco followed suit this year.
The big increases earlier were the result of the investment losses caused by the stock market decline and catastrophic claims losses tied to the terrorist attacks in 2001 and other calamities such as wildfires, floods, tornados and hurricanes, he said.
But Morrison laid some of the blame on the industry’s practice of using customers’ credit history to help set premiums. He called that an unfair process and said it resulted in some Montana policyholders seeing their rates double over the past few years.
He said he will try again in the 2005 Legislature to outlaw the practice.
Jacqueline Lenmark, spokeswoman for the American Insurance Association, said credit information may affect some individual homeowner rates, but is not responsible for overall premium trends.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Homeowners
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