Turmoil and high prices in the insurance industry

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Turmoil and high prices in the insurance industry

By MARY DEIBEL

August 29, 2002

For all the talk from Washington to Waco about terror insurance, don't blame

Osama bin Laden if your homeowner's premium has gone through the roof.

The swooning stock market atop rising reconstruction costs and claims for

everything from storms to toxic mold have insurance carriers playing

catch-up today.

During the 1990s, insurers launched price wars to woo customers with

cut-rate deals. That cutthroat competition held down homeowner premiums in

the last decade, says Hunter, a former federal insurance commissioner

who bird-dogs the issue for the Consumer Federation of America.

Tough times now have insurers petitioning the states to let them raise rates

while they cut out or cap new coverage, prompting the Consumer Federation

and other groups to form Americans for Insurance Reform. Its first act was

to call on all 50 state insurance commissioners to put an end to insurer

mismanagement and price gouging.

Consider mold claims that were once routinely covered; they now average

$17,000 apiece and soared 600 percent last year in Texas alone. Mold has

propelled Texas to the top in U.S. insurance premiums, with the average

Texan paying $1,000 a year for homeowner's insurance. It's not surprising

that homeowner's insurance has become a top issue in the Texas governor's

race.

The upshot is that big insurers have stopped writing new policies in Texas

and other states and hiked premiums for existing customers. State Farm, the

nation's largest home insurer with 15 million customers, has limited or

stopped sales of new policies in 35 states while rates for existing

customers are up an average 22 percent nationwide.

That fungus among us also has insurers petitioning states to cap mold

claims. Louisiana, for one, has eliminated mold coverage; North Carolina has

capped mold payouts at $5,000, and land and New Jersey ordered studies

of mold's health impact.

California has taken a get-tough approach with a new statute forcing

insurers to offer mold coverage and requiring home sellers to disclose if

mold or moisture ever was a problem. New York is considering a similar bill.

Florida Insurance Commissioner Tom Gallagher is holding forums on whether to

cap mold liability. The Sunshine State looks to be the next mold flashpoint,

with 431 insurers filing for mold exemptions or limitations there so far.

Gallagher is expected to decide what to do about mold coverage by late

September.

Because insurance rates and regulations are set state by state, the 60 state

and national consumer groups that make up Americans for Insurance Reform are

pooling resources to gather and publicize information quickly on insurance

developments, according to spokeswoman Joanne Doroshow.

She also expects Congress to take up a " tort reform " package this fall to

curb all kinds of lawsuits, including limits on policyholders taking their

insurance company to court if coverage is denied.

On the Net:

www.insurance-reform.org

www.naic.org - the National Association of Insurance Commissioners - has

links to each state insurance commission Web sites.

(Reach Deibel at deibelm@...)