Record disasters in '11 could mean insurance hikes in '12

Insurance executives say that last year's record-setting earthquakes, fires, hurricanes, snowstorms, tornadoes and other catastrophic events could translate into higher homeowners insurance premiums in many parts of the country as their companies attempt to recoup their payouts.

"If you're a Liberty Mutual policyholder, look out for a price increase at renewal," David H. Long, Liberty Mutual's president and CEO, told an audience of insurance executives and analysts at a forum for the property and casualty insurance industry held in New York on Tuesday.

Homeowners insurance rates have been underpriced in many areas of the country for decades, and need to increase by 15 to 20 percent, Long said later. While insurance regulators in many states weren't likely to agree with such a large change, Long said, "lots of people will be seeing five, six, seven-percent increases in homeowners insurance premiums with the next renewal."

Robert A. DiMuccio, chairman, president and CEO of Amica Mutual Insurance Co., focused on the industry's $32.6 billion in payouts to policyholders in the first nine months of 2011, due to numerous bad-weather events and catastrophes. "We're going to see some of that bleed into the rates," he said. In addition to regions traditionally associated with natural disasters—California for earthquakes and wildfires, the Northeast and Southeast for hurricanes—other, historically less-prone areas were affected in 2011. "We've seen catastrophes almost everywhere in the country," he said. "The question is, is this some sort of new normal?"

Lori D. Fouché, president and CEO of Firemen's Fund Insurance Co., was less committal about whether or where her company would be seeking premium increases. But, she noted, her company was making use of new, sophisticated software that analyzes and models potential risks, which could mean reconsidering areas not historically deemed at risk for catastrophes.

The federal government declared 99 major disasters in the United States in 2011, about triple the annual average. Twelve of those events cost insurers more than $1 billion each, according to the Insurance Information Institute, a trade group. The $32.6 billion payout for the first nine months—about $14 billion more than the average—does not include claims from the Northeast's freak Halloween snowstorm and other events, which themselves could add $3 billion to the total, the III said.

Regardless of where you live, check out Consumer Reports Money Adviser's advice on saving on homeowners insurance, plus tips on smart ways to file a claim.

—Tobie Stanger