Home, car insurance rising for Ohioans

2/10/2004

For state residents with bad credit or a history of claims, the increases could be even higher, thanks to a growing practice by insurers of using a number of factors to develop a “credit score” for customers.

“What I m quoting are base rates,” said Ann Walmer Benjamin, director of the Ohio Department of Insurance, “There are going to be individuals who may see their homeowner rates go up beyond [those projections], based on the loss experience with that homeowner.”

Insurance estimates for Michigan residents were not available yesterday.

Rising construction costs and increasingly expensive natural disasters are expected to push the cost of homeowner s insurance up nationally by 8 percent this year, according to the Insurance Information Institute in Washington. Auto insurance rates are expected to jump 6 percent nationally this year because of medical costs, vehicle repairs, jury awards, auto theft, and fraud, the institute said.

John Payak III, president of Payak Insurance Agency in Toledo, said most home insurers he represents raised rates 20 to 30 percent a year ago, but he hasn t seen an increase this year.

For auto insurance, he said, there s been a 5 percent increase on liability coverage but nothing on collision coverage.

But the credit scoring system has created a wide range of costs for his homeowner s insurance customers. The system, which differs by insurers, uses credit history and past insurance claims, but insurers won t reveal specifics. Such a system has been used for years by auto insurers, and now is being used by home insurers.

The system means that a customer with a good score will pay 30 percent below the company s average, while an average score will pay the base rate and a poor score will pay 30 percent more than the base rate, Mr. Payak said.

“A lot of consumer groups and people like myself are not all that thrilled about [the scoring],” he said. “Statistically, they ve proved that it s reliable; however, it s not fair in all cases.”

Ms. Walmer Benjamin, the Ohio insurance director, said that while there is a high correlation between someone s credit score and the risk of insuring the person, there are concerns about the fairness of such a system. Her agency has rules about how the scores can be used and is still studying the issue.

In Ohio, she said, regulators have forecast insurance premiums for houses to jump an average of 10 to 12 percent this year, or about the same as last year. What that means in dollars is less clear, however, because the state used older statistics to calculate it. For homes, it uses 2000 figures, showing the average owner s policy is $338, compared with $501 nationally, ranking Ohio among the lowest.

The national insurance institute said an average homeowner s policy this year will be about $615, up $46 from last year.

For auto owner s insurance, Ohio regulators forecast a 5 to 8 percent increase in premiums this year, also about what occurred last year. In dollars, using the most recent statistics available from 2001, the state s average policy is $614, compared with a national average of $718.

The insurance institute said an average auto policy this year will be about $898, after an 8.5 percent jump last year.