Auto insurance rates not expected to soar in Hawai'i

By Deborah Adamson
Advertiser Staff Writer

In line with the national trend, Hawai'i drivers should see only a small increase in their auto insurance premiums this year.

In the United States, auto insurance rates are expected to rise by 3.5 percent on average, the smallest hike in four years and down from a 7.8 percent increase in the previous year, according to the Insurance Information Institute, a New York-based trade group.

Rate hikes already requested by insurance companies and other factors indicate average Hawai'i rates should rise in the low single digits — barring any changes in the laws that dictate coverage.

"That's a good deal," said semi-retiree Gus Gustavson of Kailua. Gustavson said his auto insurance rates have not risen significantly in recent years. Still, he remains a bit skeptical that rates will go up just slightly.

"I'll believe it when I see it," he said.

A declining number of accidents, crackdowns on fraud and abuse and improved insurer financial performance are expected to hold down premiums nationally. The average cost for auto insurance in 2004 is estimated at $871, up $29 from the prior year.

Paul Ables, legislative chairman of the Hawaii Insurers Council, a trade group based in Honolulu, said, "The trend in Hawai'i has been fairly stable in the last four years."

"We have not seen significant increases in costs except for medical costs, and those have been factored in," Ables said.

Insurance Commissioner J.P. Schmidt added that there's nothing out of the ordinary in Hawai'i to cause auto insurers concern.

Several major insurers who do business in the state declined to say whether they plan to raise rates this year but noted they have not filed for increases thus far.

GEICO, which handles 93,000 policies in Hawai'i, is one of three exceptions. In February, the state approved an average 4 percent increase for Geico, the first hike in more than a decade, said Tim Dayton, the insurer's general manager.

AIG Hawaii, which serves 70,000 auto-policy holders, has filed for a 6 percent increase, and Allstate Insurance is seeking a 0.7 percent hike for its 30,000 customers, according to the state Insurance Division.

State Farm, the state's largest auto insurer with more than 126,500 policies, said it has no pending rate applications. The last time premiums went up was in June 2003, and that by an average 10.2 percent, said spokeswoman Carolyn Fujioka.

In 2002, State Farm's rates increased by 6.9 percent on average, but it was the first increase since 1991, she said.

"There were fewer claims, fewer losses to pay and the cost of losses was less," Fujioka said.

Island Insurance and First Insurance also have not asked for a rate increase.

Island Insurance President Linda Gilchrist said 90 percent of the company's more than 25,000 auto-policy holders saw no change or a decrease in rates last year. In 2002, Island Insurance hiked premiums by 9 percent.

Steve Tabussi, vice president of customer solutions at First Insurance, said the company has begun to give breaks to longer-term and safer drivers. Last year, First Insurance raised rates by 9.7 percent on average for 20,000 customers, which followed a 5.6 percent increase in 2002.

The recent rate increases followed years of decreases as Hawai'i auto insurance reforms brought down costs, said Brian Sullivan, editor of Auto Insurance Report, a subscriber-financed industry newsletter in Laguna Niguel, Calif.

The reforms included specified medical reimbursement rates and a lowering of the minimum insurance coverage required.

Hawai'i ranked as the second most expensive state for auto insurance in the mid-1990s; it stands 21st in the latest rankings.

In 2001, the average auto premium in Hawai'i was $705 — down 27 percent from 1995. In contrast, the national average rose by 16 percent.

"No other state has gone down like Hawai'i," Sullivan said.

But insurers remain concerned about higher car-repair costs, which are going up at twice the rate of inflation, according to the Insurance Information Institute. Higher jury awards in vehicle liability cases also worry the industry. The average award has risen by 73 percent to $323,000 in 2001.

Both of these factors could put upward pressure on rates in the future.