First comes the hail, then the hikes in insurance premiums after busy year for claims

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Posted: Wednesday, March 12, 2014 12:00 am

Homeowners along North 146th Plaza in Omaha's Eldorado neighborhood stepped outside after last April's massive hailstorm and surveyed the damage.

Shingles dented and punctured. Gutters, flashing, siding and downspouts pounded like a tin toy belonging to a 4-year-old with a new hammer.

“The roof looked like it had a bad case of acne,” said Ted Pankonin, who had paid for a new roof just three years earlier. “Black spots all over.”

Next came the insurance adjusters, computers and checkbooks in hand. Then the roofers, offering to schedule repairs. Then the workmen, replacing roofs up and down the block.

Now many of the cul-de-sac's residents, along with many other Nebraskans and Iowans, are getting an unwelcome notice: premium rate increases for their homeowners insurance — in some cases more than 20 percent.

The April 9 hailstorm prompted more than 40,000 insurance claims in Omaha, mostly for damage to houses and cars. Counting the tornado that struck Wayne, Neb., on Oct. 4 and other weather damage in 2013, insurance companies paid out $1.33 on claims for every $1 they collected in premiums last year.

It was the worst year for homeowners insurance payouts in Nebraska in at least a decade, said Nebraska Insurance Director Bruce Ramge, which meant an unprofitable year for the companies that insure against property damage from wind, hail, fire and related causes.

Companies consider a longer time period when they set rates for the coming year, but a year with bad claims can make increases more likely, Ramge said. In 2012, a fairly normal year, claims totaled about 60 percent of the premiums collected by the companies.

In Nebraska, companies that sell homeowners coverage are raising rates an average of 16.2 percent, with the higher rates taking effect as insurance policies renew. That includes nine companies with increases of more than 20 percent and five higher than 25 percent.

In Iowa, where storms were less damaging in 2013, increases are averaging 10.1 percent. Only two are raising rates by more than 20 percent, and one is decreasing its average rate slightly.

J. Robert Hunter, insurance director for the Consumer Federation of America, said rate increases wouldn't be that high if companies properly calculated the risk of losses from natural disasters, either by looking at historic data or by using computer simulation models.

Without analyzing the data supporting each company's rate increase, Hunter said, it's difficult to say whether the increases are proper. But one year's high claims should not make a difference of more than 2 percent in future rates, he said.

“You're not supposed to make up for last year's losses,” Hunter said. “Insurance companies are supposed to be forward-looking,” with premiums designed to pay future claims.

But he said companies also realize that many consumers will accept higher premiums because they know about claims from a recent storm. And sometimes a company decides to raise rates sharply because others are doing the same thing, Hunter said.

Pankonin, from the Eldorado neighborhood, said his insurance carrier, Allstate, raised his premium by about $300 a year, or about 20 percent.

Stephanie Howell, a spokeswoman for Allstate, said premium changes are based on loss trends over many years and projections of future losses.

“Allstate is committed to keeping the insurance landscape in Nebraska and Iowa competitive, and we will continue to make responsible business decisions to remain strong and positioned to deliver on its promise to customers,” she said.

Allstate offers discounts and relies on its agents to work with customers to keep rates as low as possible while meeting their needs, Howell said.

But some Nebraska policyholders are escaping the higher rates, even if they had hail damage from the same storm last spring.

Darcie and Brian Shunk and their neighbors southeast of 168th Street and Giles Road in Sarpy County had the same damage as others in the west Omaha strip that took the brunt of the April hailstorm. “It looked like it had snowed,” Darcie said. “Everybody got a new roof.”

So far, the Shunks haven't gotten a rate increase notice from their insurance carrier, Metropolitan Life.

Individual rate increases vary according to type of coverage, claims history, discounts and other factors, said Ann Avery, a spokeswoman for State Farm Mutual Insurance. The company is raising premiums by an average of 5.4 percent in Nebraska and 1.4 percent in Iowa.

State Farm fielded 12,000 claims from wind and hail damage in 2013 in Nebraska, making the state No. 10 on the company's wind-and-hail list. Texas was No. 1 with 42,000 claims. Wind and hail claims nationally cost State Farm more than $3 billion in 2013.

Premium rates are designed to cover future claims and are based partly on claims over a long period of time, not just the latest year, Avery said. That means the large payouts in 2013 or any single year won't have an undue impact on future rates, she said.

The rate-making process also takes into account factors such as prices for construction material, medical costs and other variables, she said. The company focuses on the number and cost of claims for State Farm, not what impact climate change might have. “The rate allows us to keep the promises to policyholders when claims do occur,” Avery said.

In calculating rates, American Family Mutual Insurance Co. considers 25 years of losses from catastrophes such as hailstorms, said spokesman Steve Witmer. The company is raising rates by 17 percent in Nebraska and 16 percent in Iowa, on average.

Because the company looks at losses over a long period of time, he said, you can't assume an individual's 2013 hail damage — 4,000 claims totaling more than $30 million in Nebraska — caused the increase.

“A heavy year like Nebraska had last year for catastrophes doesn't affect the rating process as much as a heavier non-catastrophic year might,” he said. A heavy non-catastrophic year would show an increase in claim costs beyond natural causes.

“Iowa had a much lighter year, relative to Nebraska,” Witmer said. “The idea looking forward is to figure out how much premium you need to meet your customers' needs.”

It's unclear whether climate change is causing more claims, he said. “We're certainly watching very closely the impact of whatever may or may not be going on with the climate.”

In the meantime, companies try to set rates so that premiums break about even, covering claims and operating expenses, he said. Insurance companies boost their reserves and make profits by investing the premium revenue until it is needed to pay claims.

The biggest increase in Nebraska is by National Farmers Union Property & Casualty Insurance Co., at 26.6 percent.

Deidra Parrish Williams, a vice president of the company, said its record of rate increase in the state “has been very conservative. What appears to be a jump in our most recent rates actually only puts us in line with our competitors' current rates.”

Ramge, the Nebraska insurance director, said this year's premium increases are higher than usual. The state reviews rates to make sure the companies are charging enough to cover their future claims, based on documentation that the companies provide about their claims experience.

“It's important that their rates are adequate so that companies can maintain their financial strength” and continue to sell insurance in the state so that consumers have a choice of carriers, Ramge said. “I think everybody understands that you want the company to be around to pay a claim if you have one.”

Premium increases vary among companies because their policies differ, their claims experiences over the years differ, the rates they have been charging differ and other factors can mean higher or lower rates, Ramge said.

In the end, he said, competition helps keep rates reasonable by giving consumers choices among companies. “They don't want to give up market share.”

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Homeowners rate increases    
These increases take effect after the dates listed as individual policies are renewed. Individual rates vary among according to type of coverage, claims history and other factors. Some companies raised rates more than once.    
     
Company Average increase Date
Nebraska    
Allied Property and Casualty Ins. Co. 9.10% 9/13/2013
Allied Property and Casualty Ins. Co. 5.9 3/15/2013
Allstate Indemnity Co. 3.3 1/2/2014
Allstate Insurance Co. 1.5 1/2/2014
Allstate Property & Casualty Ins. Co. 12 1/2/2014
Allstate Vehicle and Property Ins. Co. 12 1/2/2014
American Automobile Ins. Co. 4 10/31/2013
American Family Mutual Ins. Co. 17 7/1/2013
American Family 0.4 3/1/2014
American National General Ins. Co 17.2 12/17/2013
American Security Insurance Co. 16.9 9/1/2013
Amica Mutual Insurance Co. 7.8 12/1/2013
Armed Forces Ins. Exchange 13.9 1/6/2014
Auto Owners Ins. Co. 9 10/22/2013
Bankers Standard Insurance 0.2 10/1/2013
Battle Creek Mutual Ins. Co. 2.5 10/1/2013
Buckeye State Mutual Ins. Co. 5 12/1/2013
California Casualty Gen. Insurance Co. of Ore. 7 6/1/2013
Cincinnati Insurance Co. 9.8 10/1/2013
Columbia National Ins. Co. 10 2/1/2013
Emasco Insurance Exchange 12.4 9/1/2013
Farm Bureau 13.1 6/20/2013
Farmers Insurance Exchange 7.5 4/23/2013
Foremost Ins. Co. Grand Rapids 21 12/1/2013
Garrison Property & Casualty 12.8 10/1/2013
General Casualty of Wisconsin 16.2 6/6/2013
Grinnell Mutual Reinsurance Co. 11.8 1/1/2013
Grinnell Mutual Reinsurance Co. 19.7 1/1/2014
GuideOne America Insurance Co. 19.7 5/1/2014
Hartford Casualty Insurance Co. 25 3/7/2013
Hartford Insurance Co. of the Midwest 20 3/7/2013
Hartford Underwriters Ins. Co. 24.8 3/5/2013
Homesite Indemnity 18.9 4/26/2013
Horace Mann Property & Casualty 18 5/1/2013
IDS Property Casualty Ins. Co. 16.1 7/7/2013
IMT Insurance Co. 8.6 12/1/2013
Insurance Services Office 25 3/4/2013
Insurance Services Office 12.9 11/1/2013
Iowa Mutual Ins. Co. 19.1 8/1/2013
LeMars Insurance 10.3 1/15/2013
LeMars Insurance 6.8 3/15/2014
Liberty Insurance Corp. 19.3 1/29/2013
Liberty Insurance Corp. 12.2 3/5/2014
Liberty Mutual Fire Ins. Co. 14.8 10/24/2013
Metropolitan Direct Prop & Cas Ins. Co. 2.7 6/30/2013
Midwest Family Mutual Ins. 5 11/1/2013
MutualAideXc 9.5 11/1/2013
National Farmers Union Property & Casualty Ins. Co. 26.6 10/16/2013
Nationwide 15 7/30/2013
Nationwide Affinity Insurance Co. of America 5.7 1/29/2013
North Star Mutual Ins. Co. 12.6 5/1/2013
North Star Mutual Ins. Co. 12.5 5/15/2013
North Star Mutual Ins. Co. 7.7 1/17/2014
Pharmacists Mutual Ins. Co. 20 10/1/2013
Property and Casualty Insurance of Hartford 25.1 3/7/2013
Safeco Ins. Co. of America 13.6 9/14/2013
Sentinel Ins. Co 25 3/5/2013
Shelter Mutual Insurance Co. 3 7/5/2013
Standard Guaranty Insurance Co. 18 9/1/2013
State Farm Fire & Casualty Co. 5.4 1/15/2013
United Fire & Casualty Co. 11.1 3/1/2013
Average 16.20%  
     
Iowa    
Acuity, a Mutual Insurance Co. 5.3 3/17/2013
Aegis Security Insurance Co. 1.5 2/11/2013
Allied Property and Casualty Insurance Co.. 8.8 5/1/2013
AMCO Insurance Co.. 8 6/15/2013
American Association of Insurance Services 18.9 5/1/2013
American Family Mutual Insurance Co. 16.7 3/1/2013
American National General Insurance Co. 13.4 11/23/2013
American National Property And Casualty Co. 12.3 11/23/2013
Automobile Insurance Co. of Hartford, Conn. 4.9 5/1/2013
Auto-Owners Insurance Co. 5.6 9/16/2013
Bankers Standard Insurance Co. -0.4 8/1/2013
California Casualty General Insurance Co. of Oregon 9 7/1/2013
Cameron National Insurance Co. 9.4 10/1/2013
Cincinnati Insurance Co. 10 10/1/2013
Country Mutual Insurance Co. 6.9 6/13/2013
Depositors Insurance Co.. 8.2 6/15/2013
Economy Premier Assurance Co. 3 9/30/2013
EMCASCO Insurance Co. 16.6 1/15/2013
Employers Mutual Casualty Co. 16.7 1/15/2013
Farmers Insurance Co. Inc. 4.7 4/22/2013
Farmers Insurance Exchange 3.9 4/22/2013
First Liberty Insurance Corp. 10 10/26/2013
Foremost Insurance Co. Grand Rapids, Mich. 9 7/1/2013
Garrison Property and Casualty Insurance Co. 9 5/31/2013
GuideOne America Insurance Co. 15.3 5/1/2013
GuideOne Mutual Insurance Co. 8.9 5/1/2013
GuideOne Specialty Mutual Insurance Co. 8.8 5/1/2013
Hartford Accident and Indemnity Co. 6.5 6/1/2013
Hartford Casualty Insurance Co. 8.3 6/1/2013
Hartford Fire Insurance Co. 7.8 6/1/2013
Hartford Insurance Co. of the Midwest 5 6/1/2013
Hastings Mutual Insurance Co. 1.3 11/1/2013
Hastings Mutual Insurance Co. 4.3 4/1/2013
Homesite Insurance Co. of the Midwest 10 11/8/2013
Horace Mann Insurance Co. 6.5 8/1/2013
Horace Mann Property and Casualty Insurance Co. 14 8/1/2013
IMT Insurance Co. 6.9 12/1/2013
Insurance Services Office Inc. 6.9 12/1/2013
Integrity Mutual Insurance Co. 17.8 11/1/2013
Integrity Property & Casualty Insurance Co. 16.1 9/1/2013
Iowa Mutual Insurance Co. 17.9 11/1/2013
Le Mars Insurance Co. 9.6 1/15/2013
Liberty Insurance Corporation 15.7 1/25/2013
Liberty Mutual Fire Insurance Co. 10.1 10/26/2013
LM Insurance Corporation 15.7 1/25/2013
MemberSelect Insurance Co. 5.1 10/1/2013
Merastar Insurance Co. 3.1 9/1/2013
Metropolitan Group Property and Casualty Insurance Co. 10.1 9/30/2013
Metropolitan Property and Casualty Insurance Co. 17.2 9/30/2013
Midwest Family Mutual Insurance Co. 15 11/1/2013
National Mutual Insurance Co. 10.8 12/1/2013
Nationwide Affinity Insurance Co. of America. 8.3 5/1/2013
North Star Mutual Insurance Co. 9.8 5/1/2013
Partners Mutual Insurance Co. 8 6/15/2013
Pharmacists Mutual Insurance Co. 17.1 9/1/2013
Property and Casualty Insurance Co. of Hartford 7.9 6/1/2013
Safeco Insurance Co. of America 18.4 6/8/2013
Secura Insurance, a Mutual Co. 2.6 4/11/2013
Selective Insurance Co. of South Carolina 6.9 6/15/2013
Sentinel Insurance Co. Limited 25.1 9/19/2013
Standard Fire Insurance Co. 4.7 5/1/2013
State Auto Property and Casualty Insurance Co. 20 5/12/2013
State Automobile Mutual Insurance Co. 19.1 5/12/2013
State Farm Fire and Casualty Co. 1.4 10/1/2013
Teachers Insurance Co. 13.5 8/1/2013
Travelers Commercial Insurance Co. 5 12/23/2013
Travelers Home and Marine Insurance Co. 5 12/23/2013
Travelers Indemnity Co. of America 4.9 5/1/2013
Trumbull Insurance Co. 8.3 6/1/2013
Union Insurance Co. of Providence 16.2 1/15/2013
United Services Automobile Association 9.3 5/31/2013
Unitrin Auto and Home Insurance Co. 13.4 11/16/2013
USAA Casualty Insurance Co. 9.4 5/31/2013
USAA General Indemnity Co. 9.7 5/31/2013
Westfield Insurance Co. 5.4 1/29/2013
Westfield National Insurance Co. 2.5 1/29/20131
Average 10.10%  
     
Sources: Nebraska Department of Insurance, Iowa Division of Insurance  

Correction: Some companies' average homeowner rate increases were listed incorrectly in a previous version of this story.

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