Home Insurance Rates Forced Higher after Natural Disasters

Homeowners can expect their home insurance rates to jump in 2012, says a number of insurance experts. The damage caused by the high multitude of storms seen last year has had a significant impact on property and casualty insurers.

Record Natural Disaster Losses in 2011

There’s no doubt that 2011 was known as the year of the natural disaster. For a while, it seemed that every few days there were reports of new storms that destroyed property and claimed lives. It wasn’t everyone’s imagination, however, because by mid-year, there were already reports that 2011 had set a record for disaster losses.

Insured losses in the U.S. for the first half of 2011 were $17.8 billion, more than the $13.6 billion insurers paid in all of 2010, says Munich Re, a major European reinsurance company.

Now that insurance companies have had time to sort through disaster loss costs from tornadoes, hail, winds and lightning that devastated many areas, some insurance experts are predicting that the 2012 home insurance rateswill pay for last year’s disasters.

Home Insurance Rates Expected to Jump by 5 Percent

Robert Hartwig, President of the Insurance Information Institute (III), noted that the official numbers aren’t in yet, since renewals don’t all happen at one time. However, he expects to see a sharp increase in homeowners insurance rates, particularly in the Southeast and Midwest where the majority of storms occurred.

“We’ve had record losses for four straight years,” Hartwig said. “My sense is that premiums will probably rise 4 percent to 5 percent.”

In 2008, the average annual cost of homeowners insurance rested at $791, according to the III. By 2010, those premiums rose a bit to $807. Hartwig expects the 2011 average premium would have been about $840 and predicts homeowners can expect 2012 premiums to jump even higher.