Damage from hail still being tallied: Premiums may increase, but big jump not forecast

Hoosier homeowners and motorists could pay more for insurance this year in the wake of last April’s hailstorm that produced a nation-leading $1.5 billion in catastrophic claims.

But even as insurers continue to pay for new roofs and car body repairs, industry experts say any increase would be less than 10 percent.

So far, no insurance companies have formally requested a premium increase due to the hailstorm, according to the Indiana Department of Insurance, although claims continue to roll in. However, price hikes for reinsurance-the insurance insurers buy to cover themselves-could trickle down to insurers and their customers.

Indiana Farmers Mutual Insurance Co. will probably have to raise rates. The Carmel firm incurred $31 million in catastrophic losses last year, primarily from the Good Friday hailstorm. That total was nearly six times the $5.5 million it budgets each year for such losses.

But more important to whether Indiana Farmers raises premiums is how much Indiana Farmers must pay for reinsurance and the cost of repairs, which have risen due to higher demand after the hailstorm.

Gregg Huey, chief operating officer at Indiana Farmers, said any increase would be based on the firm’s losses over three to five years. Any price bump would stay within the range of 5 percent to 7 percent, he said.

“Yeah, it was a bad year. There may be a slight increase, only because of the demand surge and the reinsurance costs,” Huey said. “But I don’t expect a whole lot of effect from this year.”

Other insurance companies with customers in Indiana said they did not expect the hailstorm to affect rates, even though they have yet to fully evaluate its impact.

“We plan for the unexpected. Typically, one storm will not impact rates,” wrote Angie Rinock, spokeswoman for Illinoisbased State Farm, in an e-mail. Indiana Farm Bureau Insurance, Illinois-based Allstate Insurance and Ohio-based State Auto Insurance also said they have no plans to raise premiums.

While Indiana topped all states in catastrophic claims last year, its $1.5 billion total would have ranked just fifth in 2005 and third in 2004, according to the Property Claim Services unit of ISO, a New Jersey insurance research firm.

Those years saw massive catastrophic losses from hurricanes. Florida notched $18.8 billion in losses from its 2004 hurricanes and another $9.9 billion in 2005. Louisiana suffered $27.2 billion from Hurricane Katrina in 2005, which also caused $12.2 billion in losses in Mississippi.

Up to half of Katrina’s total losses fell on reinsurance companies like Swiss Reinsurance and Renaissance Re. Reinsurance firms have tripled and quadrupled the price of catastrophic reinsurance in some stormprone areas of the United States, according to the Insurance Information Institute, an industry research group. Other areas have seen only a 10-percent rise.

In spite of the sharp spike in reinsurance costs, Don Griffin, vice president for personal lines at the Property Casualty Insurers Association of America, doesn’t expect rates for Hoosier homeowners or drivers to rise more than 10 percent.

“I don’t think it’s dramatic enough that we’re going to see the kind of dramatic things we’ve seen elsewhere in the country,” Griffin said.

Last year, insurance premiums rose 20 percent to 100 percent for homeowners along the Atlantic and Gulf coasts, according to the Insurance Information Institute. But premiums rose only 2 percent to 4 percent for homeowners nationally.

For example, State Farm raised rates an average of 52 percent in Florida last year, and as high as 90 percent near Naples. In some coastal areas, State Farm, Allstate and other insurance companies have simply stopped offering catastrophic coverage.

Those moves sparked great controversy, especially since, in spite of the storm losses, U.S. property and casualty insurers have recorded some of their best profits in years. According to ISO and the Property Casualty Insurers Association, strong investment returns and strong profits from non-coastal areas in 2005 boosted the industry’s profit 11.7 percent, or $4.5 billion, to $43 billion.

Any effect of coastal hurricanes would be indirect on Indiana policyholders, because the Indiana Department of Insurance looks for local data to back up any premium increases.

“We really prefer not to include California earthquakes and Gulf Coast hurricanes in approving our rates,” said Kate Kixmiller, senior policy analyst at the Insurance Department.

So far, insurers in Indiana still aren’t sure how big their losses from the hailstorm will be. State Farm has received 46,000 claims and expects another 4,000. It has paid out $227 million to homeowners, or $5,800 per claim.

State Farm also tried to mollify unsatisfied customers-those whose claims were rejected or those who felt State Farm offered too little to pay for repairs-by offering to send third-party roof engineers to check their homes.

About 130 customers had formally complained about State Farm to the Department of Insurance. So far, 70 have accepted the engineer’s inspection.

Farm Bureau has processed more than 11,000 claims and has 100 still to go. And it’s getting more. Another four claims were filed earlier this month.

“Once the snow melts and the weather turns nicer, we’ll probably get more,” said Farm Bureau spokesman Rick Nelson. “We hope we’ve had the bulk of them.”