W. Va. Lawmakers Study Home Insurance Costs

June 16, 2004

At least one insurance company tends to charge West Virginians more to cover their homes than residents in surrounding states, even when its losses are greater in the other states, according to a presentation given to state lawmakers this week.

A second insurer, meanwhile, has traced the bulk of its in-state payouts on homeowner policies to less than 2 percent of its customers, the joint select committee assigned to study insurance issues learned at an interim meeting.

A third insurer told lawmakers that it has recently reduced its losses in West Virginia by, among other measures, inspecting the homes it covers and re-pricing policies by grouping its customers into better-defined segments.

The committee also heard from several mortgage brokers who reported an increasing number of home buys jeopardized by high insurance costs.

The Legislature pledged to study the cost and availability of homeowners policies when it passed several insurance-related measures this year. One measure creates a fraud unit to crack down on bogus claims. Another allows auto insurers to drop up to 1 percent of their customers without cause.

Lobbyist John Canfield of State Farm, the largest provider of both home and auto policies in the state, praised the fraud unit bill at the meeting. He urged lawmakers to extend the non-renewal measures to homeowners policies.

State Farm stopped selling new auto and home policies in West Virginia in 2002. Canfield said its payouts on home policies in the state have exceeded premiums it collected each year since 1994. He also said State Farm has raised its homeowners rates since 1997 by a total of nearly 50 percent, including a 27.5 percent hike in 2002.

Canfield cited figures from 2002 for West Virginia and its five neighbors that appeared to put the Mountain State in the middle or the bottom for homeowner losses.

West Virginia cost State Farm $3,618 per claim on average, lower than Kentucky or Maryland and only $7 higher than Ohio. The average cost per claim in both Pennsylvania and Virginia exceeded $3,000.

State Farm saw a similar ranking when it compared premiums to total expenses. The insurer paid out $1.51 in West Virginia for every $1 it collected. Both Kentucky and Maryland saw higher ratios, though Kentucky’s was by less than two cents.

Figures presented by Canfield also showed that a Huntington home cost $654 per year to insure while one in nearby Ashland, Ky., cost $642. And a home in Martinsburg would cost $567 per year, compared to $348 for one in Frederick, Md.

Jeff Williams, a lobbyist and lawyer for Allstate, told the committee that 1.7 percent of its customers have filed two or more claims in the last three years. Another 12 percent have filed one claim. The rest filed none.

Williams said Allstate has a loss history in the state similar to State Farm’s. It briefly stopped writing new home policies in the state, he said. Like Canfield, Williams asked lawmakers to make it easier to drop policyholders and to pay out less than the stated value of the policy for total losses.

“If you have a home valued at $100,000, and it takes $80,000 to rebuild it, we believe that’s what should be paid out,” Williams said.

Cathy Smith, an executive with Nationwide Insurance, reported a similar loss history. But she said her company may see more premiums than losses this year because of the steps it has taken. Besides price segmentation and inspections, Nationwide has firmed up policy language to define further what it covers, she said.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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