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AIG Hawaii raises
insurance rates

The carrier had not increased
rates for about 10 years, but
more accidents in costlier
cars prompted the move

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By Rob Perez
Star-Bulletin

One of the largest auto insurance carriers in Hawaii is raising rates for the first time in nearly 10 years, mainly because customers are getting into more accidents driving more expensive cars.

AIG Hawaii, which covers nearly 20 percent of the insured vehicles in Hawaii, yesterday said it is immediately raising rates an average of 8 percent on new policies and upon renewal for existing ones.

While legislative reforms in recent years have helped reduce medical costs covered by auto insurance policies, the reforms have not affected the growing costs on the property damage side, said Mike Onofrietti, vice president of underwriting for AIG Hawaii.

Those costs are rising because customers are getting into accidents more often and the cars they are driving are newer and therefore more costly, Onofrietti said.

Yesterday's action is an indications that a long period of declining auto insurance rates throughout Hawaii may be coming to an end, some industry officials say.

"We've probably hit what the bottom of the market is," Onofrietti said. "If we're not there, then we're very, very close to it."

But not all carriers face the same trends that are pushing costs up at AIG.

State Farm Mutual Automobile Insurance Co., the state's largest insurer, just this week cut rates an average of 9 percent. Over the past three years, rates have dropped about 35 percent, State Farm said.

This week's reduction was due in part to decreases in accident frequencies and the cost of claims, said State Farm spokeswoman Carolyn Fujioka.

"Whether it has reached bottom, I certainly can't say," Fujioka said.

But if a recent trend of more auto thefts persists long enough, that could put upward pressure on rates, she added.

At Island Insurance Co., President Linda Gilchrist said the carrier's loss experience has started to climb, but the company has no plans currently to adjust rates.

"It is something we are watching carefully," Gilchrist said.

Island Insurance last lowered rates 5 percent in April.

One reason accident frequencies are on the rise is because people are driving more as the economy gets better, Onofrietti said. When the economy was on the skids, people hit the road less, he said.

"When they drive less often, they can't be on the road crashing."

Another factor: people seem to be driving more aggressively, increasing the chances of accidents, Onofrietti said.

AIG said its average cost per claim has increased, and the carrier expects that trend to continue as labor rates and parts prices move up.

Asked if other companies have raised rates, Onofrietti said he was aware of a few that increased costs to customers not by raising rates but by reducing discounts or moving policyholders into more costly brackets.

Officials with the state Insurance Division could not be reached yesterday for comment.

Even with the latest increase, AIG's rates still are 24 percent lower than in 1996, Onofrietti said.

AIG provides coverage for about 117,000 vehicles in Hawaii.