- The Washington Times - Tuesday, September 16, 2003

Insurance companies and agents said yesterday that the average homeowner is unlikely to see a major increase in premiums after Hurricane Isabel hits, unless the storm picks up steam and causes more damage than expected.

Isabel, which has declined in intensity as it approaches the North Carolina coast, probably still will pack a wallop and cause major damage to homes and property. But the hurricane is the first major tropical storm to hit land this year; insurance companies had predicted a barrage of bad storms would have assaulted the United States by now.

“We knew back in January to expect six storms,” said Tom Welch, an insurance agent with Welch, Graham and Ogden in Chantilly. “So far, this is our first one. The companies had already started adjusting for this. It’s already built in to when they make the rate increases each year.”

A storm of Isabel’s strength hasn’t hit the East Coast since 1992, when Hurricane Andrew crossed South Florida with winds of more than 145 miles per hour, causing $26.5 billion in damage. Insured damages from Isabel may range from $4 billion to $25 billion, with New York’s Long Island being the costliest possible landfall, according to Risk Management Solutions Inc.

Insurers have “been collectively holding their breath for years now for the possibility of the next big one,” Hemant Shah, chief executive officer of Risk Management Solutions, told Bloomberg News. The company helps insurers gauge their risk from catastrophes. “Isabel is an interesting and very credible candidate.”

But other insurance experts who have followed hurricane trends said Isabel is more likely to resemble Hurricane Floyd, which caused heavy flood damage in North Carolina but slowed quickly and created only minor problems after hitting land and heading north.

Sustained wind speeds from Hurricane Isabel slowed to about 105 miles per hour yesterday, making it a Category 2 storm. The National Weather Service said Isabel probably would slow to a Category 1 before hitting land.

The cost of homeowners’ insurance is expected to increase by about 8 percent in 2004, according to the Insurance Information Institute.

Spokeswoman Elizabeth Mosely said much of the increase is caused by rising construction costs, jury awards and mold claims. But she said an increase in hurricane-related claims over the last decade is a major contributor as well.

Reported hurricane losses between 1989 and 1999 were 10 times higher than during the previous 40 years, according to the Insurance Services Organization. Hurricane Andrew and Hurricane Hugo, which slammed South Carolina, caused more than $7 billion in damage.

Allstate Corp. is restricting new auto- and home-insurance sales in coastal zones of the Carolinas and Virginia. Chubb suspended home- and auto-insurance sales from Georgia to New Jersey and on Long Island Monday, and Hartford stopped selling new policies along the Georgia and Carolina coasts Friday.

Insurers have begun relocating adjusters and resources to North Carolina.

Insurance companies said they set rates using historical analyses of the frequency and strength of major weather events, or “catastrophes.” If a storm is expected and claims from damage aren’t extraordinarily high, then a premium increase may not be necessary.

“You won’t see an immediate impact simply because a storm makes landfall,” said Michael Trevino, a spokesman for Allstate. “It’s not about just experiencing an event and reacting to it that raises the premium.”

Agents said that to avoid increased premiums, policyholders should avoid filing claims for minor repairs.

“What we try to tell our clients is that the homeowners’ policy is not a maintenance policy,” Mr. Welch said. “Little things like 15 shingles blowing off the roof of the house are probably not something you want to turn in.”

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