Personal lines rates up in U.S.

Both homeowners’ and auto insurance premiums are on the rise in the U.S., says the Insurance Information Institute (III). The III says that rising construction costs and natural disaster losses are pushing homeowners’ rates up, with an 8% increase expected for 2004. This follows on an estimated 7% increase in 2003.Average cost of a homeowners’ policy next year should be US$615, a US$46 increase over 2003.”Part of the increase reflects choices more homeowners are making,” says Robert Hartwig, senior vice president and economist for the III. “People are taking advantage of record low interest rates and are moving into new homes or making additions to their existing homes in near record numbers. These upgrades and additions are pushing up insurance costs. People expect their premium to stay the same, but they don’t realize they have more house to insure.”The loss ratio on homeowners’ insurance has averaged 117% between 1990 and 2002. Last year, the industry lost a total of US$3.5 billion on the line, on the heels of a US$7.3 billion loss in 2001.The study notes that the severity of catastrophes has risen dramatically since 1990, with events such as Hurricane Andrew, the Northridge earthquake, along with smaller events including tornadoes, wildfires, hail and other severe weather. This comes on top of a boom in mold-related claims and lawsuits, particularly in Texas and California.The III also notes that auto insurance rates are on an upward climb, rising 8.4% last year, and an estimated 9% this year. 2000 saw a significant increase in auto claims costs, but these have tapered off since, but premium increases are now reflecting this past losses.