Iowa homeowners feeling the sting at insurance renewal time [The Gazette, Cedar Rapids, Iowa]

Nov. 30--Accelerating homeowners insurance premium increases have become a recent trend in Iowa, with many policyholders seeing rates rise 7 percent or more this year.

Insurance companies have told some of the agencies that sell their policies that their returns on homeowners insurance have turned negative in recent years due largely to the increased frequency of weather catastrophes.

The increases have been due "mostly to increases in loss experience for the companies, and they mostly get down to wind and hail claims," said Tom Alger, communications director for the Iowa Insurance Division.

Alger said the insurance division requires companies to base their increases on their claims experience within the state of Iowa, so they technically aren't allowed to boost rates in Iowa to cover losses from events such as last year's tornados in Joplin, Mo., and Tuscaloosa, Ala., or wildfires in Texas.

Insurance companies are able to base their increase request partly on their investment returns on surplus funds, however. With investment returns lagging due to low interest rates and poor stock market performance, Alger said that has been a factor in the rate increase filings seen this year.

At the Millhiser Smtih Agency in Cedar Rapids, an independent multiline insurance agency, "10 percent is going to be close to the norm from what I know," said Tara Widdel, personal lines manager. Some of the increases coming up on policy renewal dates have been lower, but the vast majority of rate decreases have been due to other factors such as discounts for having multiple policies with the same company, she added.

Widdel said Iowa homeowners filed a lot of claims in 2008, 2009, 2010 and 2011 due to weather events. Insurance companies are beginning to take a different view of the likely frequency of such catastrophes and adjust their rates accordingly, she said.

Alger said the rate increase filings presented to the Iowa Insurance Division this year have mostly run at around 7 percent compared to 5 percent in recent years.

The state requires that insurance companies base their rates on projected future claims rather than on past claims, Alger said. Major catastrophes elsewhere can indirectly affect those rates, Alger added, because they can stimulate demand for building and roofing materials that result in higher prices here.

Veteran insurance agent Steve Wells of United Insurance Agencies in Marion said he's seen homeowners premiums rising between 2 percent and 8 percent upon renewals this year. The insurance companies United Insurance works with are largely Midwestern regional companies, however, and Wells said they're probably less motivated to seek increases because they have not sustained the massive claims some nationwide companies have seen.

This year's premium increases may just be the beginning of something more serious, however.

"What the homeowners companies are predicting are a lot worse than what we're seeing this year," said Wells, the agency's principal. He said the homeowners insurance carriers are indicating they aren't getting satisfactory returns on homeowners lines.

"Over the next five years, you'll see a significant increase in homeowners' rates," Wells said. "The problem is, insurance companies hate to be the first one to do it."

United Fire Group in Cedar Rapids provides homeowners insurance through its United Fire & Casualty business. Executive Vice President Mike Wilkins said the company's recent premium increases have been running about 3.5 percent -- in line with recent years. He acknowledged 2011 was a tough year for claims, but said United Fire tries hard not to have a kneejerk reaction to short-term claims trends.

The claims situation for homeowners lines was similar in most of the Midwest, Wilkins said, adding that he did not think many companies had good results on their homeowners' lines in 2011.

Alger said the number of homeowners insurance companies providing coverage in Iowa creates a competitive market in which homeowners receiving a large premium increase have a reasonable chance of finding a lower rate elsewhere.

Wells said some policy holders that have been affected by premium increases at his agency recently have voluntarily increased the deductibles on their policy to qualify for lower premiums.

Widdel, of the Millhiser Smith Agency, said switching carriers doesn't seem to be offering savings for many policyholders in the current climate, in part because policyholders who switch might lose loyalty discounts they received through their present carrier. Widdel said Millhiser Smith's agents work with policyholders to make sure they qualify for the lowest available rates under insurance company formulas that are considering many more factors than they have in the past.

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(c)2011 The Gazette (Cedar Rapids, Iowa)

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