An
extraordinary number of catastrophes, the high
cost of home repairs and excessive jury awards
due to the emergence of mold claims are
pushing the cost of homeowners insurance
upward an average of 8 percent nationwide in
2002 and a projected 9 percent in 2003,
according to a new report by the Insurance
Information Institute (I.I.I.).
During
the 1990s, the frequency and severity of
catastrophes began to increase dramatically.
Over the past 12 years, insurers paid out more
than $100 billion in catastrophe-related
losses, about $700 million per month, many
times 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 I.I.I. 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. This phenomenon is a
key factor for rising homeowners’ insurance
rates.
In
addition, mold has recently emerged as the
dominant cost driver in some states, according
to the report. 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.
In
addition to rising homeowner costs, the report
stated 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 are the principle reasons for
higher auto insurance rates.
