Ick! Premiums grow

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http://desmoinesregister.com/news/stories/c4789010/18927626.html

Ick! Premiums grow

By TISH WILLIAMS

Register Staff Writer

08/11/2002

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It's a silent menace, lurking behind the junk mail in your mailbox. It's

festering, unopened in your in-basket of bills.

When you finally open your homeowner's insurance bill, the paperwork might

be accompanied by a 1950s horror-movie scream. Insurance bills are scary in

2002.

For starters, they're larger than in years past. On top of that, many Iowans

won't just get a bill, they'll get a note - free of charge - that explains

that the " toxic mold " they've been hearing about in the headlines and on TV

tabloid shows isn't necessarily covered by their homeowner's policies.

Still others will get a thanks-but-no-thanks note from their insurers

politely begging out of renewing their coverage. That can make hearts pump

faster than Mel Gibson standing in the middle of a crop circle.

To be fair, it isn't a good year for insurance companies, either.

After a long-running streak of billions in profit, the property and casualty

industry as a whole lost $7.9 billion in 2001, according to the Insurance

Information Institute. Business also looks to be unprofitable in 2002.

The Sept. 11 terrorist attacks contributed to the plummet, but the bulk of

the pain comes from the deter- iorating health of the stock market and

another year of severe weather.

Like many Americans, insurance companies felt flush in the late 1990s as

their investments enabled them to make oodles in profit while expanding

their customer ranks. When the market took away its helping hand, the

industry stumbled.

Loretta Worters of the Insurance Information Institute says that in the

past, insurance companies were willing to lose money on homeowner's

insurance if it helped them gain lucrative business such as automobile

insurance. Insurance companies have kept rates low, with investment gains

making up the difference. But without that padding, insurance companies say

policy prices have to climb.

Iowa's leading underwriter, State Farm Insurance, has increased rates 20

percent in Iowa so far this year, while Des Moines-based Allied Insurance

tallied an 18 percent hike in the state. That compares to an estimated

nationwide average of about 8 percent in 2002, as tabulated by the Insurance

Information Institute.

Meanwhile, three of the past five years have brought significant

weather-damage claims in Iowa.

As Pam Kopriva-, the State Farm agency field executive for 28 rural

Iowa counties, says, " We understand we're going to have a bad year one out

of 20, but three of the last five? Once is a fluke, twice is bad luck and

three times you wonder what's going on. "

She says that despite the hubbub about mold, it's Iowa's " piddling, terrible

weather, " starring wind and hail damage, that has spooked insurance

companies into asking for bigger claims in recent years. A hailstorm in

western Iowa and eastern Nebraska on April 10 for example, counts as the

fifth-biggest catastrophe State Farm has covered in Iowa.

Consequently, as of July 1, State Farm put a freeze on new homeowner

policies in Iowa, unless a person has other business with State Farm

already, such as renter's insurance. Kopriva- says the move is

temporary, meant to contain costs.

Similar reasoning is causing insurance companies to decline to renew some

unlucky Iowa consumers' home policies.

Agent of Insurance in Des Moines says that insurers are " a

lot more sensitive about claims - even if they're small - than they used to

be. Sometimes, when a company sees two or three claims " in a customer's

account, they may make note of it.

recommends higher deductibles to clients to reduce smaller claims and

to avoid as much as possible a premium spike this year.

Finally, the hot-button issue rattling Iowans' nerves is mold.

Patrons of a few insurance companies may receive a stomach-churning

mold-coverage clarification that accompanies their new policies or renewals.

Before panic sets in - as it has in Texas, Florida and California, where

claims have climbed precipitously - insurers want Iowans to know where they

stand.

For State Farm, Allied and many others, mold damage caused by a leaky roof,

pipe or any other factor would be considered an ongoing maintenance issue

not covered by typical homeowner's insurance.

These policies are meant to cover " insured peril, " as Allied spokesperson

Rick puts it, and not problems that develop during time.

Allied policyholders will see that mold claims have been capped at $10,000,

but it's important to remember that the coverage Allied provides is still

only applicable to damage that results from " insured peril. "

As an example, if a pipe bursts in a basement, the damage is covered. If the

repair following the pipe trouble is inadequate and leads to some mold

growth, Allied will pay up to $10,000 to fix it.

Representatives of the Iowa Insurance Division say they've only received two

consumer calls on mold-related problems. Spokesman Kinney says the

agency has not objected to the newly announced exclusions by insurers,

because it can't tell them what to cover.

Kinney says many insurers have informed his office that they plan to exclude

mold from their policies, though not all of those companies have announced

the move to their customers yet.

The less Iowans hear about mold, the better. In states such as Texas, with

skyrocketing mold claims, insurance rates have risen as much as 40 percent

to 50 percent in 2002.

Even with rate hikes in 2002, until insurers balance their books or the

stock market provides relief, the tension has room to mount.