Insurance costs not likely to increase

By Frank Cho
Advertiser Staff Writer

Regulators and competitors said yesterday that State Farm's decision to begin restricting the number of new homeowners' policies it writes in the Islands should not affect prices or the availability of coverage for new homeowners.

State Farm, the nation's largest home insurance company, said Wednesday that it will limit the number of new home insurance policies its agents write because of rising claims costs and its rapidly growing share of Hawai'i's home insurance market.

But a historically slow real estate market that is only now beginning to recover its financial legs has kept demand for new homeowner policies relatively low, experts said.

"In the short-term I don't think (State Farm's decision) will have much of an affect," said Robin Campaniano, president and chief executive officer of AIG Hawaii. "It's not like there are tons of homes out there uninsured."

This means that other insurance companies will see only a small boost, if any, in business, keeping prices for home insurance coverage under control at least for now.

"There are just too many carriers out there right now writing homeowners insurance," said Wayne Metcalf, state insurance commissioner. There are dozens of insurance carriers registered with the state to write home insurance policies, though only a fraction actually do.

Metcalf said State Farm aims for between 20 percent and 25 percent marketshare where they write lines of insurance. According to state insurance data, the company is already at or near those levels.

"So it's not unreasonable they would begin limiting how much more business (State Farm) goes after," Metcalf said.

While it was not clear how long State Farm will restrict some of its agents from writing new homeowner policies, the company says it will still write other lines of business such as auto insurance.

"The market is alive and well for all lines of insurance," said State Farm spokeswoman Carolyn Fujioka. "We believe this is just a temporary response to our rapid growth,"

Ernest Fukeda, president and chief operating officer of Hawaiian Insurance & Guaranty Co. Ltd., said several major insurance carriers have been closely watching how much new business their agents write.

"I think a lot of them have commercial lines and personal lines, but they have only so much reinsurance and they have to manage that," Fukeda said. Reinsurance, is the coverage that insurers themselves buy to spread their risk to a larger company.

Fukeda said some are choosing to increase the business lines at the expense of personal lines such as homeowners and auto because profit margins are higher.

"We are not overly concerned right now. The home insurance market is not very big and if people start to come in looking for coverage we'll be ready," Fukeda said.

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