Latest NAIC Report Shows Average Premium for Homeowners Insurance Dipped 3.8% Nationwide

The average premium for the most commonly purchased homeowners policy in the United States slipped 3.8% to $791, the National Association of Insurance Commissioners said in its recently released 2008 Homeowners Insurance Report.

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Texas topped the lists for the highest average homeowners premium in 2008. The average homeowners premium in Texas was $1,460, according to the report. Texas bumped Florida, which held the top spot in 2007. In the latest survey, Florida slipped to second, with an average premium of $1,390; followed by Louisiana, at $1,155; Oklahoma, at $1,048; and Massachusetts, at $1,026.

Jerry Hagins, a spokesman with the Texas Department of Insurance, said Texas would be near the top because of its severe weather. Mark Hanna, spokesman for the Insurance Council of Texas, concurred, noting Texas experiences all types of violent weather, including hail and thunder storms, tornadoes, hurricanes and wildfires. “We have just about everything including earthquakes,” Hanna said.

The report cautions against making major comparisons between states because of variations in economic conditions, catastrophe exposure, real-estate values and construction costs from state to state. Specific policy limits and deductibles policyholders choose also affect premiums.

The premium figures are for HO-3, the common policies, which insure against all risks of direct loss on buildings, except losses specifically excluded in the policy, and insures against named perils coverage on personal property.

The HO-3 rate in Texas is artificially high because it includes premiums for the Texas Windstorm Insurance Association, which writes strictly wind and hail policies, the report said.

Florida results aren’t directly comparable to those of other states because the data for Florida exclude policies written by the state-run Citizens Property Insurance Corp. Created in 2002 as an insurer of last-resort, Citizens morphed to competitor in the private market in 2007 (BestWire, Oct.18, 2010). In 2009, Citizens was the second largest multiperil homeowners’ insurer in <location value=”LS/us.fl” idsrc=”xmltag.org”>Florida, with a 13.4% market share. Only State Farm Group, with a 15.1% market share, was larger, according to BestLink, which provides online access to A.M. Best Co.’s database of insurance information.

“The policy count and premium amount may significantly underestimate the cost of comprehensive homeowners insurance in large segments of the Florida market,” the report states.

Hagins cautioned that comparing Texas to other states is an “apples-to-oranges” situation.

Both Hagins and Hanna noted that around one-third of Texans have the HO-3 policy, and Hagins said the department has asked the NAIC to consider an average of all types of homeowners’ policies.

Florida Office of Insurance Regulation spokeswoman Brittany Benner said since the 2008 data, several trends have emerged in Florida, including an increase in noncatastrophe-loss cost drivers such as sinkhole claims.

“It is important to note, the office has since identified a number of noncatastrophe cost drivers that may increase premiums in the future,” Benner said in an email. “The office will continue working with legislators and newly elected principals to address these issues in the coming months.”

Sinkhole claims are driving rates higher in Florida, even as the state has avoided a direct hurricane hit in recent years (BestWire, Nov. 11, 2010).

The states with the lowest average premiums in 2008 were Idaho, at $387; Utah, at $432; Oregon, at $439; Washington, at $471 and Wisconsin, at $503, the NAIC report found.

Other types of coverage include HO-1, a basic policy covering named perils on buildings and personal property, and HO-2, which provides coverage for more perils than an HO-1 package. HO-4 offers named perils coverage for personal property of tenants, while HO-6 is available for condominium and cooperative unit owners. There are also HO-5 and HO-8 policies.

(By Diana Rosenberg, senior associate editor, BestWeek)