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Home insurance rates on rise

Jason Cato
| Saturday, Oct. 27, 2012, 9:26 p.m.

Homeowners insurance rates spiked in recent years in Pennsylvania and across the nation, and catastrophic weather and other factors could double the rate of increase this year, according to the state Insurance Department.

Rates across the state climbed 8.94 percent through midyear, nearly doubling last year's increase of 5.07 percent.

“With two more quarters to go, that number can and will change,” said Insurance Department spokeswoman Melissa Fox. “It is not final. ... (But) the department is noticing an upward trend. This trend is not specific to Pennsylvania — all states are experiencing the same thing.”

Thanks to last year's tornado in Westmoreland County, Richard Stoner, 67, of North Huntingdon had his rates with Erie Insurance increase sharply.

“After the tornado hit, I had to have the roof replaced,” Stoner said. “I'm probably paying about another $200 a year now because of it.”

He estimated his annual premium is now about $700.

Rates across the country are projected to climb by 5 or 6 percent this year, continuing a four-year trend and pushing the national average annual premium above $1,000 for the first time, predicts the nonprofit Insurance Information Institute.

The average annual homeowners premium was $791 in 2008, according to the institute.

Severe weather, the rising cost of repairs and a growing number of claims are driving the increases, said Robert Hartwig, an economist and president of the insurance institute.

“Weather is becoming more volatile and severe, and the cost associated with those claims is going up,” he said.

Highlighted by deadly tornadoes in Missouri and Alabama, insurers paid out a record $35.9 billion for catastrophic losses in 2011, compared with an average of $23.8 billion annually over the previous decade, Hartwig said.

Allstate raised rates in Pennsylvania by 15 percent in March. Both Erie Insurance and Travelers later received permission from the state Insurance Department to increase rates by about 9 percent.

“It was a justifiable rate increase,” said Joe Vahey, vice president and personal line product manager for Erie Insurance. “2011 was a very significant catastrophic event year. ... Customers have seen firsthand the damage these recent storms have caused.”

Among those events was severe flooding in the central and eastern parts of the state last August and September from the remnants of Hurricane Irene and Tropical Storm Lee. The storms caused about $425 million in losses covered by private insurers and government relief agencies.

Pennsylvania suffered $4.6 billion — ranking 20th nationally — in insured property damage for all catastrophes since 1998, according to figures from Verisk Analytics, a New Jersey-based insurance risk research company.

Over that same period, Pennsylvania's $2.3 billion in severe weather-related losses ranked 19th; its $1.04 billion in hurricane-related losses ranked 11th.

But it isn't just the storms that hit here that affect Erie Insurance, the country's 15th-largest homeowners insurance premium holder with 1.7 million policies in 11 states and Washington, D.C., Vahey said.

In addition to raising premiums, some insurers are demanding higher deductibles and limiting the coverage they offer. In some storm-prone states, including Florida, Alabama and North Carolina, some insurers dropped tens of thousands of customers.

Insurance companies are prevented by law from raising rates for past weather events, but they factor in weather trends in determining their potential exposure in the future.

“That's been driving claims up, and that eventually drives rates up,” Hartwig said. “You're making a bet that your home will be destroyed or damaged. The insurance company is making the opposite bet.”

Staff writer Bill Vidonic contributed to this report. Jason Cato is a staff writer for Trib Total Media. He can be reached at 412-320-7936 or

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