Hurricane rates jump Insurance company USAA is raising the cost of hurricane coverage for Hawaii homeowners by an average of 75 percent, as well as increasing deductibles.
USAA boosts the cost
of its coverage 75 percentBy Lyn Danninger
ldanninger@starbulletin.comCompany spokesman Roger Wildermuth said about 5,000 policies in Hawaii are affected.
"Most increases are in the 75 percent range," he said.
The company has been notifying policyholders -- mostly active military or retired military and family members -- since September that a review of its Hawaii business revealed that rates did not adequately cover USAA's exposure to catastrophic losses.
Like other Hawaii insurers, the company began offering hurricane coverage when it pulled out of the Hawaii Hurricane Relief Fund, which the state launched in 1993 to offer hurricane coverage that private insurers had canceled. The fund stopped writing or renewing policies in 2001.
Wildermuth said USAA reassessed its situation in Hawaii and employed two models to predict its exposure should a hurricane hit the islands. Based on the results, the company increased premiums and deductibles, he said. Prior to the change, deductibles had been a flat dollar amount rather than a percentage of a home's value, a method used by other insurers.
"The threat of catastrophic hurricanes in Hawaii presents a very significant risk to USAA and its membership based on modeling from highly regarded consulting firms," Wildermuth said. "Based on this data, USAA developed a responsible rate structure that we believe is in line with the risk presented to the association."
Wildermuth declined to disclose the average cost of hurricane coverage, but said it's typically 60 percent of the cost of the property portion of a USAA homeowners' package.
Hawaii's largest insurer, State Farm Insurance, has filed to increase rates with the state Insurance Division but doesn't yet know if the increase is approved, said spokeswoman Carolyn Fujioka said.
Like USAA, the company began offering the hurricane endorsement to its homeowners' policies in 1999 after pulling out of the Hurricane Relief Fund.
Fujioka said she could not comment on what a likely increase would be.
"There hasn't been anything approved yet so I can't comment on any future changes," she said.
Other insurers have also filed in recent months for rate increases with the division, said Insurance Commissioner J.P. Schmidt.
"I believe hurricane insurance has been underpriced and insurance companies are looking at what kind of exposure they have, what kind of reserves they'll need and the likelihood of another (hurricane)," he said.
Mike Onofrietti, vice president with insurance company AIG Hawaii, said USAA's large increase was also related to the structure of its rates and deductibles.
"They had a much lower hurricane deductible than anyone else, so had been under market in both price and the deductible. It seems now like they are trying to catch up," he said.
Onofrietti said his company has received a number of inquiries from USAA policyholders shopping for alternatives.
"Most of their customers are long-term so rarely would they call anyone else. Recently we've seen an increase in that, mostly because of the catch-up. It's not like it's a flood but it's more than we normally do," he said.
Onofrietti said his company had not filed recently with the Insurance Division for an increase on hurricane insurance.
"It's not a large part of our business," he said. "The last time we filed rate-wise was in 1999. That's when we re-introduced hurricane (coverage) and decided to do it on our own."
Onofrietti estimates between eight and 10 insurers actively write hurricane coverage in Hawaii. Several companies also use Zephyr Insurance Co., a stand-alone hurricane-damage insurer, to write the hurricane portion of their homeowners policies.
Zephyr President Amori Ogata said his company had not filed for any rate increases.
"It's been a while. As far as I know, there's nothing we are looking at at this time. But it's not to say there aren't others who are re-evaluating," Ogata said.
Myles Murakami, president of Atlas Insurance Agency, which places insurance with various carriers, said it's likely all homeowner premiums will increase sooner or later because of the increased cost of re-insurance.
"All the premiums will go up because all the insurers use re-insurance and that has gone up. It's not just a local problem, it's a national problem," he said.
Even so, Murakami doubts premium increases requested by other insurers would reach those of USAA.
"It's not just on hurricane, but everything in property and casualty. I sense that people will be going in with filings," he said. "If they haven't been, they will be. We just don't know what kind of percentages yet but certainly no increases that high."
USAA
State Farm Insurance
AIG Hawaii
Zephyr Insurance Co.