Insurer’s exit
won’t doom hurricane
fund, official says

State Farm's pullout still
leaves 13 firms who
are participating

By Jerry Tune
Star-Bulletin

State Farm Fire and Casualty Company's decision to leave the Hawaii Hurricane Relief Fund, if approved by state insurance regulators, would take out one of the largest insurance companies. But a state fund official said the move would not change the need for the relief fund, which now services about 157,000 policyholders.

"We still have 13 companies and about $130 million in the trust fund," said Scott Clawson, who handles the fund's program for strengthening homes with hurricane mitigation devices.

State Farm announced this week that it has 61,000 Hawaii policyholders with hurricane insurance, which includes 42,000 in single-family homes that are the most vulnerable to hurricane damage. There are 18,800 policyholders who have coverage of contents in condominiums. The condominium associations carry the policy to cover the actual building.

State Farm's request must be approved by the state insurance division. The filing includes a request to reduce homeowner rates an average of 15 percent for frame construction and an average of 25 percent for masonry construction.

Carolyn Fujioka, public affairs director at State Farm, said the company "at this time" does not plan to continue the hurricane relief fund's program to reward homeowners who strengthen their homes. However, she said the company is interested in comments from policyholders.

The Hurricane Relief Fund is moving to increase rate reductions for those who make their homes stronger.

Clawson said homeowners can now get as much as a 30 percent reduction if they strengthen roof-to-wall, wall-to-frame connections and add shutters over windows. An actuary is looking at plans to increase these credits. If the relief fund board approves them, the new credit figures will go to the insurance division in January or February as a rate change filing, Clawson said.

"We are also considering compensating agents who help those homeowners who want to get the credits," Clawson said.

Added paperwork to get the credits discourages insurance agents from doing this work, and that's one reason why the credits have not been used more, he said.

Clawson also would like to compensate architects, engineers and contractors for working with homeowners.

While Hawaii still has many single-wall and older termite-ridden homes which are more vulnerable to hurricane damage, they are still lumped into the category of frame homes, with newer homes built under higher code requirements.

Insurance companies generally place homes in categories only by frame or concrete construction. However, Fujioka said that State Farm also considers the age of utilities as a safety factor in the insurance cost.

The company said that most policyholders will receive a decrease in the combined homeowners and hurricane premium compared to what they paid for State Farm homeowners and the hurricane relief fund coverage previously. If the insurance division approves the change, State Farm will start implementing new rates for new customers on March 1 and for renewal business on May 1. It would take until May 2000 to complete the shift of all policyholders from the state relief fund to State Farm coverage, Fujioka said.