Experts say the path of destruction left by Hurricane Katrina likely will lead to higher insurance rates in the metro-east and across the country, although it is unclear how much and how soon rates will rise.
Although insurers track claims experience on a state-by-state basis, and claims in Mississippi and Louisiana won’t affect the calculation of Illinois rates, the cost of in-demand construction supplies will, said Dick Luedke, a spokesman for State Farm Insurance Co. in Bloomington, Ill.
“If the cost of building materials goes up because of the lack of supply, that’s going to have an effect countrywide,” Luedke said. “It will cost more to repair houses in Illinois because of the increased materials cost, so Illinois customers could see some increase in their rates to compensate for that factor.”
Michael McRaith, director of the Illinois Department of Insurance, said people with policies from large insurance companies are probably safe from a major rate hike.
“Your larger companies, like State Farm and Allstate, are very well funded,” McRaith said. “They have large surpluses that they can tap into when something like this happens.”
Because Illinois does not regulate homeowners insurance, the government can’t step in and block a potential rate increase, McRaith said.
Despite the high financial toll of the destruction in Mississippi and Louisiana, insurance companies might dodge most of the financial blow since many property owners in the coastal area did not have flood insurance.
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