Consumers in Hawai'i can expect to pay more for most insurance

By Frank Cho
Advertiser Staff Writer

After several years of steady or even declining insurance costs, many Hawai'i residents next year will face rate increases in home, auto and healthcare premiums.

Illuistration by Martha Hernandez • The Honolulu Advertiser

Allstate Insurance Co. is raising homeowners' insurance premiums an average of 11.9 percent in 2003 — the company's first increase in homeowner premiums in eight years. First Insurance Co. of Hawaii raised overall homeowner rates 5.9 percent on average and nearly 40 percent on hurricane coverage.

As homeowner policies come up for renewal next year, customers also could see the average rate increase from less that 1 percent at Island Insurance to more than 20 percent at USAA Insurance for certain coverages.

"The increasing cost of reinsurance is certainly a cost driver and that is rippling through the market," said Stephen Tabussi, vice president of marketing for First Insurance.

Homeowners are not the only ones who face paying more next year.

The state in November approved a request by the insurance industry to raise the "loss-cost" portion — the largest of workers' compensation rates — by 8 percent. And the Hawaii Medical Service Association and Kaiser health plans — the state's two biggest health insurers — are planning to seek approval from regulators to increase rates to cover rising costs.

Neither health insurer has detailed the rate increases they will seek. Kaiser raised its rates 8.7 percent last January; HMSA raised rates about 5 percent in July.

Meanwhile, auto insurance also is rising. State Farm Insurance, Hawai'i's largest auto insurance carrier, raised auto insurance rates about 7 percent this year in a move that will cost Hawai'i drivers nearly $6 million annually. It was that company's first auto rate increase in 10 years.

"Certainly, the loss-cost portion have increased while costs for some other lines have been more stable," said Gordon Ito, acting state insurance commissioner.

Ito said a number of insurance companies have sought approval for rate increases over the past several months. And few of them have also asked for exclusions such as the ability to drop coverage for claims such as mold.

Exactly how many insurers are seeking rate increases is unclear because many of the filings are kept confidential as the state collects more information from the insurers. State insurance regulators say they do not have a database to track rate filings and it is difficult to determine how many applications may be pending approval at any one time.

Allstate, the state's No. 2 home insurer with $11 million in premiums last year, said the cost of repairing a home is up 7.2 percent this year and has been running at an annual growth rate of 6 percent for the past several years — several times faster than inflation. In addition, the company said that cases of insurance fraud are also on the rise.

Stock market gains by insurance companies in the late 1990s had helped many Hawaii insurers keep their rates low even as the cost of claims increased, insurance industry officials say. But starting in 2000, stock market losses and dropping interest rates severely cut into insurers' reserves.

"It's costing us more and more money to keep our promise of protecting our customers," said Scott Richardson, a spokesman for Allstate. "We want to make sure we have the funds there when people need it."

Reach Frank Cho at 525-8088, or fcho@honoluluadvertiser.com.