Morrison to investigate rising insurance rates

HELENA - State Insurance Commissioner John Morrison, citing a large number of consumer complaints, said Monday his office will investigate a pattern of rapidly rising homeowner insurance rates in Montana.

He said the study will determine whether the rate increases are excessive or unfairly discriminatory, and whether anything can be done to curtail the escalating premiums.

Morrison, expressing concern about Montanans' ability to afford insurance on their homes, said the four largest homeowner insurance companies in the state have increased their rates between 25 percent and 67 percent in the past three years.

He said preliminary work by his staff found all 15,232 of Allstate's policyholders in Montana face at least a 20 percent increase in their premiums due the company's most recent rate change. Almost 37 percent of Allstate's customers will have an increase of 40 percent or more, he said.

Thirteen percent of Safeco's policyholders have increases of 50 percent or more, Morrison added. Nearly 9,300 homeowners insured by State Farm and almost 7,000 covered by Farmers Insurance have increases of at least 20 percent.

''We're going to make sure there is evidence to justify these increases,'' Morrison said. ''If there isn't, we're going to ask the companies to reconsider them. If they don't, we have to make a decision on whether to take them to hearing.''

Insurance industry officials said they have no problem with the investigation, but defended the rate increases as legitimate reflections of losses the companies have had.

They said a growing number of claims, especially high-priced ones, are a big reason for the rising rates.

John Handy, spokesman for the regional State Farm Insurance office in DuPont, Wash., said increased costs of labor, litigation, medical care and building materials have contributed to the premium growth. Hail damage is a large problem for eastern Montana residents, he said.

Roger McGlenn, executive director for the Independent Insurance Agents Association of Montana, said new problems with mold in homes have become a big factor in claims.

Some insurance companies are finding it more difficult to find reinsurance, a process that shares the loss risk with other companies, and that can affect premiums, he said.

''The rate increases are less than in other parts of the country,'' McGlenn said. ''It's not out of line with what we're seeing in the rest of the country.''

Jacqueline Lenmark, lobbyist for the American Insurance Association, said larger, more expensive homes - particularly those being built in remote areas with poor wildfire protection - contribute to premium increases.

Still, she said, figures collected by the Insurance Information Institute show Montana's average homeowner premium of $429 ranked 27th in the nation in 1999.

However, that was before the recent steep increases cited by Morrison.

Morrison said he's particularly concerned about insurers illegally trying to recoup investment losses due to the stock market tumble over the past two years.

Handy said State Farm sets its Montana rates based on the claims experience among its 54,000 policyholders in the state, not on investment success or losses by insured elsewhere in the country.

While State Farm boosted its Montana premiums an average of 16.2 percent last year, its rates in Idaho climbed 17.9 percent and Oregon customers saw a 21.5 percent increase, he said.

Morrison emphasized he's not assuming wrongdoing by insurers. ''We recognize conditions that have caused these companies to raise rates, but we want to make sure the companies have not increased rates more than they have to.''

Handy promised cooperation from State Farm, saying the company ''understands the state auditor's function is to oversee state insurance operations. This announcement doesn't surprise us.''