Home and auto insurance rates going up

Associated Press

SEATTLE — State regulators cite rising home and car repair costs, rising medical costs and weather-related losses in explaining their move to authorize the biggest increase in home and auto insurance rates in a decade.

Consumers will see an average increase of 5 percent in auto-insurance premiums, and increases of 10 percent or more in homeowner premiums, a Seattle newspaper reported Saturday. Those projections are based on rate increases authorized so far by state Insurance Commissioner Mike Kreidler, the newspaper said.

The increases could show up as early as this month, depending on policy renewal dates.

On Friday, Kreidler said his office was "very carefully reviewing any rate increases to make sure they are justified. The companies have to show they are experiencing the kinds of losses to justify the rate increases they are requesting."

He encouraged consumers to shop around, noting a "significant variation" in rates among companies

The auto-rate increases are related chiefly to rising medical and car-repair costs, said Lisa Smego, senior policy analyst in Kreidler’s office. Other factors include increased legal costs and rising wages as people hurt in accidents are compensated for lost pay.

Rising home repair costs are driving the increases in homeowner’s insurance, as well as weather-related claims for events including windstorms in Western Washington and fires in Eastern Washington. Other factors include coverage enhancements and insurance company losses in sales of home policies.

The Sept. 11 terrorist attacks may also be a factor, Smego said, because insurance companies buy insurance for themselves. Losses arising from the attack could push prices higher for that coverage, and the increase may be passed along to consumers.

Another variable is "credit scoring," an increasingly popular industry practice that assigns risk and sets rates based partly on a consumer’s credit history. Kreidler, concerned that the practice may discriminate against some consumers, plans to introduce legislation in the upcoming legislative session to curb the practice.

"Credit scoring is also bringing a dimension into this," Smego said. "We’ve seen the rate filing (requests to increase rates) go up 80 to 100 percent for a small percentage of the population."

The insurance industry insists that, overall, the practice reduces premiums and enables companies to write more policies.

Larry Kibbee, northwest regional vice president of the Alliance of American Insurers, a trade group representing 360 insurance companies, said the rate changes are strictly related to losses.

"Insurance rates are the product of loss, period," he said.

According to the latest figures available from the National Association of Insurance Commissioners, the national average annual auto premium in 1999 — the latest year for which figures were available — was $783.14, and $784.56 in Washington.

For homeowners, the national average premium in 1998 was $481, and $405 in Washington.

The group said Washington ranked 18th for auto rates, but could not provide a ranking for homeowners insurance.

A more recent survey of homeowner rates by the Washington, D.C.-based Consumer Federation of America ranks Washington 13th out of 27 states reporting in 2001, according to Bob Hunter, the group’s director of insurance.

Hunter, a former Texas insurance commissioner, said his study indicates that the 10 percent plus increase in Washington homeowners’ rates this year will place the state on the "high end" of such increases.