Gone with the wind
Insurance against hurricane losses
continues to rise as companies heed
two new isle-based risk models
Rates for hurricane insurance coverage from a number of Hawaii insurers have been on the upswing since last year.
Although not all insurers have gotten the increases they requested, some substantial hikes have been approved.
For State Farm Insurance Cos., Hawaii's largest property insurer, the average increase for the property portion of homeowners' policies was 13.8 percent beginning in September. Under the hurricane portion of the policy, the company requested an average increase of 40.4 percent. The state Insurance Division ended up approving a maximum rate increase of 25 percent for State Farm's entire homeowners' policy, including the hurricane endorsement, said State Farm spokeswoman Carolyn Fujioka.
"In order to approve the filing, the Insurance Division said we needed to cap it at 25 percent for the first renewal period. If there is a residual, that would fall into the next renewal period," she said.
Fujioka said hurricane coverage can represent as much as 50 percent of a homeowner's policy.
Insurers have adjusted their rates based on more accurate predictions gleaned from two new risk models specific to Hawaii, she said.
While one hurricane risk model was introduced in Hawaii at the end of 2000, a second model went into effect in 2003.
"Pricing is reflective of new and improved models," she said.
Insurance Commissioner J.P. Schmidt said while he is concerned about the impact the increases have on homeowners, the rates need to be adequate.
"Hopefully, this does get the insurers in a better position to cover claims that occur should a hurricane hit," he said.
Among the other insurers in Hawaii's homeowners' market, First Insurance Co. of Hawaii submitted a filing to the division that took effect in December, according to Insurance Division records. While the homeowners' portion of the policy decreased by 11.9 percent, the hurricane portion of the policy increased by 29 percent. RLI Insurance Co. filed for an average 32.9 percent rate increase for the hurricane portion of its homeowners' policies effective Oct. 1, 2003. Another insurer, USAA, which averaged a 75 percent rate increase for its hurricane coverage in 2002, got approval for a 30 percent increase that took effect Nov. 1, 2003. And Liberty Mutual has hiked hurricane rates 25.1 percent effective this month.
Schmidt notes that while enhanced modeling has improved the insurers' ability to evaluate hurricane risk, another factor contributing to hurricane rate increases is the cost of repairing homes.
Schmidt said it is too early to say if rates for hurricane coverage are now where they need to be.
"We're continuing to watch it very closely," he said.
He also noted that not all insurers have filed for increases yet.
"I do know that there are some companies who didn't file for increases last year, so they may be looking at adjusting rates this year," Schmidt said.