THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, June 14, 1996 TAG: 9606140551
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 77 lines
Allstate Insurance Co., citing the potential for heavy hurricane-related losses along the Virginia coast, said it will raise its rates for homeowners' insurance in Virginia Beach by an average of 74 percent beginning Aug. 1.
Allstate, the nation's second-largest insurer of homes and automobiles, said its rates in Norfolk, Portsmouth, Chesapeake and Suffolk will increase an average of 23 percent.
In Newport News and Hampton, its homeowners' rates will climb 47 percent, the Northbrook, Ill.-based insurer said.
``We're not happy about this,'' said Bill Ballinger, Allstate's regional underwriting manager for Virginia, Maryland and Washington. ``Nobody likes telling their customers about having to pay higher rates.''
But Allstate, which insures one in five homes in Virginia Beach, needs more in premiums to cover possible losses from hurricane damage, Ballinger said.
Meanwhile, another major provider of homeowners' insurance in the region - State Farm - said it will raise its homeowners' rates for existing customers beginning Sept. 1.
State Farm, the largest insurer of homes and autos in the country, said the price of its homeowners' coverage will climb an average of 9.9 percent in Virginia Beach, Norfolk, Portsmouth and Chesapeake, and 6.1 percent in Suffolk.
The increases will take effect July 1 for new customers.
State Farm insures about 16 percent of the homes in Virginia Beach and in Hampton Roads, said Mary Beth Cramer, a State Farm spokeswoman.
State Farm and Allstate said they will continue renewing the policies of their existing customers but will be selective when writing new policies in the region.
``We're not taking all comers, but we are taking some new business,'' State Farm's Cramer said.
The abrupt increases in Allstate's rates are due partly to the company's use of more accurate computer models of storm damage, Ballinger said. These models have done a better job defining Allstate's potential losses if a catastrophic storm hit coastal Virginia, he said.
When Hurricane Andrew struck Florida in 1992 and inflicted $16 billion of losses on insurance companies, several smaller insurers collapsed. Some companies, including Allstate and State Farm, stopped writing new homeowners' policies in parts of Florida and refused to renew some existing policies.
``Hurricane Andrew was a wake-up call for the industry,'' Cramer said. At the property-insurance unit of State Farm, ``it wiped out our reserves.''
Reserves are the amounts that insurers designate to pay their policyholders' claims and meet other obligations.
A variety of factors, including the type of policy purchased, the location of a home and a policyholder's history of claims against the company, will influence the size of increase that an individual homeowner will see.
Some policyholders may be able to soften the impact of higher rates by taking larger deductibles or reducing the amount of coverage they buy.
The rate increases can take effect after insurance companies file their rates with Virginia's Bureau of Insurance.
It's too early to estimate how many Allstate customers will likely move to another insurer, Ballinger said. That will depend partly on how many other companies boost their rates for homeowners' coverage, he said.
John C. Clyburn, a Nationwide Insurance agent in Virginia Beach, predicted that a 74 percent rate increase will prompt many Allstate policyholders in Virginia Beach to begin shopping around for another insurer.
``I've got a feeling that the phones will be ringing off the hook,'' he said.
But Greg Mansell, district manager of Farmers Insurance in Virginia Beach, said he expected only a modest increase in new business from the Allstate and State Farm rate increases.
``Will there be some movement of business in our direction? Probably some,'' he said. ``Is it going to be large? Probably not.''
Partly because of the company's concern about hurricane-related losses, Farmers raised its rates for homeowners' coverage in Hampton Roads by as much as 49 percent in April, Mansell said. ILLUSTRATION: Graphic
VP
HOMEOWNERS' INSURANCE AVERAGE RATE INCREASES
[For complete graphic, please see microfilm] by CNB