By Todd Wallack
The Boston Globe
Consumers, already contending with the rising cost of gasoline, food, and other necessities, could now also face sharply higher home insurance premiums.
After several years of modest increases, insurance companies are raising rates to offset a big jump in claims related to damage caused by tornadoes, severe snowstorms, and Tropical Storm Irene last year, according to industry executives. The increases, which must be approved by the state, will likely affect most of the state’s nearly 2 million policy holders, and if approved, homeowners will see their rates go up when they renew or buy new policies this year.
“Homeowners rates are likely to go up a lot this year,” said Chris Olie, chairman of Bunker Hill Insurance. in Boston. “It was a wake-up call from Mother Nature.”
Bunker Hill, plans to raise its rates by 11.9 percent this year. Another insurer, The Andover Companies, plans to raise rates an average of 9.3 percent.
Commerce Insurance, the second largest home insurer in the state, is raising rates by 8.5 percent; Safety Insurance, by 10 percent. and Holyoke Mutual, a smaller carrier in Salem, has applied for a 20.3 percent increase.
The increases mark a sharp departure from the past few years, when insurance rates remained generally stable. The average annual premium on a traditional homeowner insurance policy rose less than 1 percent a year from 2007 to 2010 to just under $1,100, according to the state Division of Insurance.
But insurance companies say they need larger increases now because they were hit so hard by wild weather, including a brutal winter a year ago that caused widespread damage from ice and snow; deadly tornadoes that swept through Western and Central Massachusetts in June; Tropical Storm Irene that caused flooding and wind damage in August; and an early snowstorm that downed trees and power lines across the state in October.
Andover Companies, for instance, said it lost $50 million on home insurance in the state last year – more than it earned on Massachusetts policies in the entire previous decade.
“I’ve never seen results as bad as they were last year,” said Donald Vose, vice president for underwriting for Andover. “Just about everything that could go wrong did.”
The damage wasn’t confined to Massachusetts. Many states were pounded last year by tornadoes, hurricanes, wildfires, and other natural disasters, driving rates up nationwide. For instance, Chubb Corp., the fifth largest home insurer in Massachusetts, said it is generally requesting rate increases of 5 percent to 6 percent across the country this year, compared with 3 to 4 percent last year.
Chubb, of Warren. N.J., declined to comment on how large an increase it is seeking in Massachusetts.