- The Washington Times - Wednesday, June 2, 2004

The insurance industry is jacking up rates for hurricane damage, and in some cases dropping coverage to stay profitable.

In the wake of Hurricane Isabel and other natural disasters, the insurers say they will be the next victims unless policyholders pay more.

“Let’s put it this way,” said Loretta L. Worters, spokeswoman for the Insurance Information Institute, an information clearinghouse for the insurance industry. “In 2003, there were three billion-dollar-plus disasters, including the California wildfires, Hurricane Isabel and an assortment of smaller disasters.”

The insured losses totaled $13 billion, the third-highest year on record.

“How can an industry sustain itself if it doesn’t have rate increases?” she said.

Virginia’s Bureau of Insurance is warning residents to make sure they are adequately protected by insurance as hurricane season begins this week.

“Review your existing insurance policy carefully and make sure you understand what it does and does not cover and how the deductibles work,” said Virginia Insurance Commissioner Alfred W. Gross in an advisory to residents.

Consumers who wait until a storm system develops in the Atlantic are not likely to find insurers who will sell them policies at reasonable rates, the insurance commission says.

Hurricane season runs from June 1 through Nov. 30.

Mid-Atlantic policyholders face only slight inconveniences from hurricane insurance compared with Gulf states.

In Florida, the average annual wind-storm premium has jumped more than 200 percent during the past decade to reach $1,445 this year. In Texas, wind-storm rates have gone up 30 percent over the past decade to cost an annual average of $574.

Last September, Hurricane Isabel churned through Mid-Atlantic states, causing nearly $2 billion in damage in Virginia, the District and Maryland as well as 36 deaths. Virginia got the brunt of the damage.

The hurricane added to a financial climate for homeowners insurers that already was depressed.

Homeowners insurers in Virginia pay an average of $1.19 on claims for every $1 in premiums they collect, said Ken Schrad, spokes-man for the Virginia Bureau of Insurance.

Adding to the insurance industrylosses are a series of smaller disasters, such as flooding, hail and snow, as well as increasing property values and weak returns on investments.

As a result, insurers are making policyholders share their losses by forcing them to pay a percentage of the damages, rather than a flat deductible, Mr. Schrad said.

In the District, the Department of Insurance, Securities and Banking says homeowners are finding it more difficult to find insurance for wind and storm damage since Hurricane Isabel.

“With respect to homeowners, we did not see any increase in rates,” said Dana Sheppard, the department’s policy and public affairs director. “But what we did see was an increase in non-renewals. The companies were telling people they were not going to renew them.”

Most hurricane damage comes from flooding, not high wind, according to the Virginia insurance commission.

Meanwhile, few homeowners’ insurance policies cover flood damage.

One option for homeowners is to purchase the insurance from the federal government, which sells it to residents in the most flood-prone areas under the National Flood Insurance Program.

The insurance industry in general is doing well, despite natural disasters.

“We had an excellent first quarter,” said Joe Annotti, spokesman for the Property Casualty Insurance Association of America.

Losses have stabilized and premium increases are paying off for insurers, he said.

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