FOR RELEASE:
September 30, 2004

FOR INFORMATION:
Mary Bonelli/Dan Kelso: 614.228.1593
After hours: Mary/614.235.7112

Ohioans pay one-third less than US average for homeowners insurance

COLUMBUS–When it comes to homeowners insurance (HO), Ohio continues to be the “affordable state,” based on a study released by the National Association of Insurance Commissioners (NAIC) this month. The study found that Ohioans pay one-third less than the US average for homeowners insurance. Ohio’s 2001 average homeowners insurance premium ranked 47th lowest in comparison to all states and Washington, DC with an average homeowners insurance premium of $359 compared to the US average of $536.
(See chart at end of release.)

The HO-3 policy served as the basis of the NAIC homeowners insurance study. It is the most common policy written providing the broadest coverage available.

The HO-3 policy represents over 84% of US policyholders and about 83% of Ohio homeowners. It provides coverage for the home and other structures located on the insured’s premises against many perils including fire, lightning, windstorm, hail, explosion, riot, smoke, glass breakage, vandalism, burglary, robbery and theft. It also provides protection for damage from falling objects and weight of ice, snow and sleet, frozen pipes and other perils not specified as exclusions. Personal property is covered up to selected limits and as outlined in the policy.

The NAIC study included 2001 average renters insurance premiums by state. The study found that Ohio renters also pay less than the US average for coverage: $146 in Ohio compared to the national average of $178. According to the Insurance Research Council, the percentage of renters who have insurance almost doubled to about one-half in 2001 from nearly one-fourth in 2000.

HO trend analysis

Upon analyzing the results, Ohio Insurance Institute (OII) President Daniel J. Kelso noted that while the 2001 homeowner’s insurance figures for Ohio reflect the general rise in premiums across the country, Ohioans are affected to a lesser degree.
“Although Ohio homeowners have experienced premium increases for the last several years, they tend to be lower than those in similar-sized states,” he said. “There are also signs of premium stabilization in Ohio,” he added.

According to the Ohio Department of Insurance, the top 10 writers of homeowners insurance (representing about 70% of Ohio’s market) implemented an average premium increase of 2.9% through May 2004. This equates to about a $14 homeowners insurance premium increase in 2004, according to the OII president. This comes after two years of increases averaging 14%.

“There are a number of factors working in favor of Ohio homeowners insurance consumers,” said Kelso.

AM Best data for 2002 shows that only three states–Florida, Pennsylvania and Illinois–have more homeowners insurance providers than Ohio. In 2002, there were 289 companies licensed to offer homeowners insurance in the Buckeye state, with Ohio’s total homeowners premium volume ranking eighth in the nation.

According to the OII, the states with lower average premiums–Delaware, Oregon, Idaho and Wisconsin–are smaller in population and premium base.

Ohio’s homeowners insurance market is sustaining growth. ODI figures show there were 3.33 million homeowners policies in force in Ohio in 2001, up from 3.26 million in 2000. Of the 3.33 million policies in force, 2.83 million were homeowners policies, 496,124 were condominium or renters insurance policies and 9,768 were dwelling/fire policies.

“Ohio’s strong insurance market, combined with its stable regulatory climate, creates a favorable business environment for insurers,” Kelso said. “Competition among insurers benefits consumers and helps keep Ohio’s premium increases lower than in other parts of the country.”

Factors affecting HO premiums

Claims settlement and future risk issues from the recent hurricane events affecting Florida and several other states remain the focus of the industry and have raised questions regarding future premiums in Ohio.

“This is a commonly asked question these days,” said Kelso. “It’s difficult to project exactly how catastrophe losses affect premiums from one year to the next, but part of future premiums is based on an insurer’s past loss exposure from storms and other types of homeowners losses over a period of time. This is analyzed on a regional basis, meaning that Ohioans don’t directly pay for the risk of hurricane or earthquake occurrences that are prevalent in some parts of the country, nor do those living in these areas pay for our risk of tornadoes or winter storms.”

Factors affecting HO premiums from the consumer’s perspective include: Type of home construction (brick, masonry, wood, etc.), limits of coverage, deductibles, locale, additional coverage endorsements (if any), proximity to a water source, and claims and credit history.

Factors affecting homeowners premiums from an insurance company’s standpoint include:

• Cost of construction: On average, home construction costs in Ohio rose 10.4% between 1998–2003. A residential home built in Ohio in 1998 for $100,000 cost $110,400 to build in 2003.
• Growth in home repair and improvements and related costs: According to the US Department of Labor, Bureau of Labor Statistics, the cost of household item repair rose 22.9% between 1998–2002. A February 2003 report by Harvard's Joint Center for Housing Studies (JCHS) found about 41 million homeowners added to or improved their homes between 2001–02. Remodeling expenditure totals, which includes home and rental property maintenance and repair, and home and rental property improvements were estimated at $214 billion in 2001.
• Home values are on the rise. The National Association of Homebuilders estimates the average price of a US existing home in 2004 to be $224,000, up 27% since 2000. The average price of an existing home in 2000 was $176,200. The higher the value of your home, the more it costs to insure.
• Company’s loss experience: Part of future premiums is based on an insurer’s past loss exposure from storms and other types of homeowners losses over a period of time. Each company’s loss exposure varies by the type and location of the storm, and the number of policyholders affected.

The OII is a trade association representing insurance companies and agent groups for the property/casualty insurance industry. Its primary objective is to help Ohioans achieve a better understanding of insurance and safety issues.

Additional Web resources:

1. HO insurance outlook: http://www.ohioinsurance.org/newsroom/homeowners09-04.asp
2. Homeowners savings tips: www.ohioinsurance.org/factbook2002/chapter4/chapter4_f.shtml
3. 2000 Average homeowners and renters insurance premiums by state (pdf file) http://www.ohioinsurance.org/newsroom/pdf/fb_pg65.pdf