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The Daily News of Los Angeles

Homeowners’ insurance costs are expected to rise 2.8 percent in 2004 – the smallest increase in five years – even though natural-disaster losses last year hit the third-highest level ever, according to an industry tracker.

This year, homeowners will pay on average $608 for coverage, $17 more than in 2003, said the New York-based Insurance Information Institute.

Last year the cost of a homeowners policy jumped 7.4 percent from 2002 and losses caused by natural disasters totaled nearly $13 billion.

Policy costs have increased 20 percent since 2004.

The smaller increase forecast this year is being attributed to small decreases in the frequency and cost of claims, said Robert Hartwig, chief economist and senior vice president at the New York-based institute.

“Insurers were able to catch up with the losses faster than they expected,” Hartwig said. “Were it not for the catastrophic losses last year, the results would be quite good indeed.”

The institute’s survey is for the nation; whether it will apply to California is unclear. Rate increases here must be submitted to the California Department of Insurance and can be challenged by the department’s commissioner or consumers.

And even though wildfires caused more than $2 billion in damage last year, one of the nation’s biggest disasters, a consumer advocacy group doesn’t think that should beget an automatic rate increase.

“We actually don’t believe there needs to be any rate increase in California due to the fires because homeowners have been buying insurance for years to cover a disaster like last year’s wildfires,” said Doug Heller, a senior consumer advocate at the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

He anticipates some increase requests will be filed this summer.

Pete Moraga, a spokesman for the Insurance Information Network of California, said the industry is still sorting out the impact of last year’s fires.

“We’re coming out of a hard market, no question about that,” he said.

Nor does he have an estimate on how much California rates might increase.

The insurance institute, a nonprofit organization sponsored by the property/casualty insurance industry, notes that rates have been steadily rising since 1995.

Hartwig notes that some of the increase in the cost of homeowners insurance reflects choices made by consumers. Over the past several years, millions of families took advantage of near-record low interest rates, purchased larger homes or made additions and improvements to their existing homes in record numbers, he said.

These cost more to insure because they are more expensive to rebuild.
Contact the author: Gregory J. Wilcox, (818) 713-3743 or [email protected]

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