- The Washington Times - Tuesday, March 11, 2003

Two months after Rose Safir bought her Silver Spring home last summer, Geico Corp. canceled her homeowners policy, leaving her scrambling to find a new insurance carrier. "I was in hysterics," Ms. Safir said. Geico told her the home presented too much risk because the previous homeowner had filed a water-damage claim. It broke the news in September, after Ms. Safir had settled on the property and moved in.
It wasn't easy finding new insurance, she said. When she did, she had to agree to pay a "significantly higher" premium than she paid Geico.
More new homeowners are finding themselves in Ms. Safir's situation, real estate agents say.
The weak stock market and a rise in expensive claims particularly for mold and other water-related damage have hit the insurance industry hard, forcing carriers to get tough with policyholders.
In some cases, companies are refusing to issue "binder" coverage, the tentative form of insurance that is needed to close a home purchase. In other cases, companies are issuing binders, then canceling them after determining that the buyer presents too much risk.
Insurance has become too difficult to obtain, creating a barrier to homeownership, according to the National Association of Realtors, a real estate industry trade group.
The association said last month that it is investigating the problem. The investigation, which is expected to conclude by May, is focused on three areas: soaring premiums, water-damaged properties that have become "stigmatized" because insurers fear expensive mold claims, and the use of credit-scoring to deny coverage.
New home buyers with little credit are hit the hardest, according to the group.
"Insurance has always been something that people have taken for granted. That is beginning to change," said Catherine B. Whatley, the association's president.
The insurance industry disputes the real estate group's charges, saying they don't make sense given the strength of the housing market, one of the few bright spots in the current conomy.
A record 5.57 million existing single-family homes were sold in the United States in 2002, up 5 percent from 2001, the association said.
"It's very odd. If we are seeing record home sales and you have to have insurance to obtain a mortgage, it's hard to see how insurance is an impediment to the housing market," said Philip J. Crowley, spokesman for the Insurance Information Institute, an industry-funded research group.
He acknowledged that insurance premiums are rising, but said it is primarily because housing values are increasing and expensive mold claims have pumped up premiums for everyone.
The average cost of homeowners insurance in the United States rose 8 percent, from $512 in 2001 to $553 in 2002, according to the institute.
This year, the average cost is expected to rise 9 percent, to $603, the institute said.
The average premium for homeowners in the District was $617 in 1999, the fourth-highest in the nation, according to the institute's most recent data.
In Maryland, homeowners paid an average $372 premium, the 42nd highest that year. In Virginia, the average premium was $345, the 45th highest.
Realtors have also attacked the use of so-called CLUE reports in determining a potential policyholder's eligibility for homeowners insurance.
The Comprehensive Loss Underwriting Exchange, a national database, provides claims-history information to insurers. Real estate agents say insurers are using CLUE reports to deny coverage to properties with even one claim.
"What we are seeing now are people who are turned down for insurance or having their policy canceled because of just one or two water-related claims," Ms. Whatley said.

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