Forecast mixed for 2012 individual home-insurance rates

This year has shaped up to be one of the most volatile storm years on record, and the insurance industry has taken notice.

From January to June 2011, catastrophic-storm losses totaled $17.8 billion—compared with a previous 10-year average of $6.4 billion—according to insurance company Munich Re. The data represent the latest in a 4-year trend toward more-frequent and more-powerful storms, according to risk-assessment company Risk Management Systems (RMS).

However, what hasn’t been determined is by how much the increased storm activity will affect the premiums of homeowner’s insurance in states that are prone to severe storms. Spokespeople from Allstate and Nationwide say it’s too soon to determine any effect. Matthew Neilson, who is a senior project manager at RMS, tells Consumers Digest that homeowners could be affected, but he doesn’t know by how much. Insurers “are taking a huge hit” and would want to share the pain among homeowners, Neilson says, but he and other experts with whom we spoke point out that market competition prevents insurers from raising rates too much and thus losing business.

Steve Weisbart, who is senior vice president and chief economist at Insurance Information Institute, points out that insurance rates are regulated by state governments, so insurance companies can’t raise overall insurance rates without approval from a state’s insurance department. However, insurers can raise individual rates for homeowners who are deemed a greater “risk.”

Stay tuned.

– K. Fanuko