Morrison studies increase in homeowners insurance rates for solutions
Helena, Mont. - The four largest insurance companies that write homeowners insurance in Montana have increased their rates between 25 percent and 67 percent since 2000, according to State Auditor John Morrison.
Based on the number of complaints received from Montana consumers and recent rate increases by companies that sell insurance in Montana, Morrison directed his staff to study homeowner insurance rates to determine what, if anything, can be done to curtail the rising rates. The study is the first of its kind ever conducted by the Montana Insurance Department in the State Auditor's Office.
"I am concerned about the affordability of homeowners insurance for Montanans," Morrison said. "We are going to further study companies with the highest rate increases to determine whether they are excessive or unfairly discriminatory."
The Insurance Department has reviewed the rates of companies that write the largest share of homeowner policies in Montana, which amounted to about 60 percent of the market. Rates increases for five companies with the largest impact on the market are listed below.
Percent of 2002 Market Share
Cumulative Rate Increase Since 2000
Policyholders with Increase of 20% or More in Recently Filed Rate Change
Farmers/Fire Ins. Exchange
Allstate Insurance Co.
One hundred percent of Allstate Insurance Co.'s Montana policyholders received a rate increase of 20 percent or more in the company's most recent rate change. Nearly 37 percent received an increase of 40 percent or more.
Safeco instituted rate increases of 20 percent or more for nearly one-third of its policyholders. Thirteen percent of its policyholders received increases of 50 percent or more.
Montana law allows insurance companies to charge rates without first obtaining approval from the insurance department. However, the department can strike down rates that are unfairly discriminatory.
"Companies have told us that large increases have been driven by individual policyholders' credit scores and loss history," Morrison said.
The 2003 Legislature considered a bill proposed by the State Auditor's Office that would have limited the ways insurance companies could use a consumer's credit in underwriting and rating policies. Another bill would have banned the use of credit scoring altogether. Neither bill became law.
Montana is not alone in its rising premiums. Nationally, rates rose rapidly in 2002, according to the Consumer Federation of America. The national consumer advocacy organization reported an average 12 percent increase in homeowner insurance rates across the country.
Over the past few years, the national residential insurance market has experienced some difficult times, resulting in a hard insurance market, Morrison said.
A hard market can be caused by many contributing factors including, but not limited to: reduced competition, decreased investment income, a poorly performing stock market, increased loss exposure, catastrophic losses, increased construction costs, insufficient rates, poor management practices, poor underwriting practices, or increased fraud. By all accounts, residential insurance currently is experiencing a hard market.
"With this trend affecting the entire nation, now is the time for consumers to be proactive," Morrison said. "They should check their coverage to ensure it not only meets their needs, but also to make sure they are getting the most coverage for their money."
The State Auditor's Office is available to help consumers facing problems with rising insurance costs. The office publishes several guides and fact sheets that can assist consumers in shopping for and understanding their coverage. Consumers should call the office at 1-800-332-6148 to receive a free copy of our guides to homeowner and auto insurance.