NEW YORK — Homeowners insurance rates are expected to increase 8 percent in 2004, according to a new report from the Insurance Information Institute.
The average cost of home insurance nationwide is expected to be $615 in 2004, up $46 from a year ago, the report found. Home insurance rose 7 percent to an average cost of $569 in 2003.
Robert Hartwig, III's chief economist, said in a statement that the public has taken advantage of low interest rates in recent years to move into new homes or upgrade existing homes. As a result, the upgrades and additions to properties are helping to drive up insurance costs, he said.
"People expect their premium rates to stay the same, but they don't realize they have more house to insure," he said.
Insurers have been aggressively seeking rate increases and tightening their underwriting in recent years after a period of highly competitive underwriting among insurers. The average cost of insuring a home was $418 in 1995, according to III.
The industry also has been hit in recent years with a rapid rise in mold claims, particularly in Texas, and a significant increase in the price of building materials and construction in the boom period of the late 1990s In 2002, home insurance losses exceeded earned premiums by $3.5 billion.
The industry lost $7.3 billion in 2001 — its second-worst year since Hurricane Andrew in 1992, according to III.