Insurance costs up as hurricane season arrives

CHARLOTTE, N.C. - As hurricane season arrives, many homeowners are finding that insurance is either more expensive or harder to get.

Homeowners from New York to Florida and in the Gulf Coast region are seeing premiums rise and coverage change. And more are being dropped by their carriers as insurers try to limit their exposure in high-risk areas.

"They just don't like being in the business . . . too much risk," said Scott Hall of Market Street Advisers, a financial advisory firm in Wilmington, N.C.

Homeowners' insurance premiums are up about 3 percent nationwide and probably more in some coastal areas, according to the Insurance Information Institute, a New York-based industry group. Hurricane season starts tomorrow and runs till Nov. 30.

Several factors are affecting premiums and coverage, including the $26 billion insurers paid out on catastrophic losses last year and the impact of market turmoil on company earnings. Changes in state regulations are also driving up some premiums.

Late last year, Allstate Corp. and State Farm Insurance Cos. raised premiums in states including Texas, saying the increase was needed to offset a rising number of claims. Hurricanes Gustav and Ike struck the United States in September.

Allstate also instituted policy changes that raised deductibles and stopped offering coverage in high-risk coastal areas, including downstate New York.

"We continually review all those items and make the necessary adjustments," Allstate spokesman Mike Siemienas said.

State Farm Florida, a subsidiary of the Bloomington, Ill.-based insurer, is trying to pull out of the Florida market after the state denied the company's request for a 47 percent rate hike. Company officials have said they need the increase to remain financially viable. Discussions with regulators are continuing.

Shawna Ackerman, who cochairs the American Academy of Actuaries' property and casualty extreme-events committee, said she had not heard of any mass nonrenewals or existing policy changes that are in the works for 2009. But insurers are continuing a process that began after they paid out $23.7 billion in claims - a number adjusted for inflation as of 2008 - on Hurricane Andrew in 1992, trying to limit their exposure, or vulnerability to losses, in coastal areas.

Hurricanes Ivan in 2004 and Katrina in 2005 forced several to pull back further, with many companies reevaluating policy coverages and raising rates. Ivan resulted in more than $8.1 billion in losses after adjusting for inflation, while Katrina was the most costly, with losses now calculated at $45.2 billion, according to Insurance Information Institute data.

Bob Hartwig, the institute's president, said insurers would raise premiums wherever state regulators allow them to.

"In areas where they are not given that opportunity," he said, "insurers are going to scale back their exposure."