Associated Press
SEATTLE — Safeco Corp. plans to charge more for its personal and commercial insurance policies in 2002, executives said Monday.
On a conference call, Mike McGavick, Safeco’s president and chief executive, said the Seattle insurer plans to raise auto-insurance rates by 7 percent to 8 percent and homeowners-insurance rates by 12 percent this year, Dow Jones News Service reported.
Hit by rising claims costs for homeowners insurance in some states, Safeco has been playing down that business in favor of others. It lowered the commission it pays agents when they sell a policy that covers only a home to 10 percent from 15 percent, while raising the commission on a six-month policy covering a new car to 17 percent from 10 percent.
"It’s an important signal to the market about how we’re aligning the agents’ profits to our profit," McGavick said.
Safeco is introducing a computerized system to price auto-insurance policies individually that McGavick expects will improve the company’s profits. The insurer plans to have the system in place in 38 states by the end of the first quarter, up from eight now.
McGavick said the new system will allow Safeco to offer policies at an "appropriate" price for 90 percent to 95 percent of the people that walk in the door.
He said the property insurance industry appears to be more realistic in its underwriting than before, charging appropriate rates for the risks covered. Industrywide, commercial-insurance rates are moving up 15 percent to 30 percent when policies are renewed, he said.
During the fourth quarter, Safeco saw its exposure net of reinsurance to the Sept. 11 attacks at the World Trade Center increase 48.6 percent to $52 million. The company attributed the increase to a reinsurance treaty that it found couldn’t be booked as a risk transfer under United States general accounting principles.
However, Safeco doesn’t expect its gross loss related to surety bonds written for Enron Corp. to change. The insurer reported an $18 million loss, net of reinsurance, related to Enron in the fourth quarter.
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