Editor's note: An earlier version of this story incorrectly spelled Jim Newins' name.
If you have gotten a homeowners insurance quote lately, you may still be reeling from the rate increase.
Homeowners insurance companies in Kansas filed last year for rate increases that averaged 14.6 percent, with some companies filing for more than 20 percent.
And that came on top of an average increase of 6 percent the year before.
The companies attribute the increase largely to the high amount of hail, wind and tornado damage claims in recent years that are affecting the rates.
“There has been a tremendous amount of wind and hail damage,” said Steve Witmer, spokesman for American Family Insurance. “Looking forward to the level of the premiums to take care of customers, we needed more than we were asking for.”
For three of the past four years, Farmers Insurance set new records for claims, said company spokesman Luis Sahagun. Losses in 2011 were an 82 percent jump over the previous worst year.
The companies say they don’t raise rates to recoup past losses but to cover future losses based on their outlook for coming years.
“What we are seeing is a trend suggesting more storms, a higher frequency of storms with higher losses, and it means higher rates to cover the losses going forward,” Sahagun said.
State regulators say such an increase is to be expected.
Last year was relatively light, said Jim Newins, property and casualty division director for the Kansas Department of Insurance, but the state sustained more than $1 billion in claims in 2011. For every $1 in premiums companies took in, they paid out $1.31 – and that doesn’t include the cost of running the companies, he said.
“That puts incredible pressure on rates,” he said.
Newins said he expects home insurance rates to continue to rise for at least the next two to three years.
Spokesmen for the companies say they are barred by regulators from commenting on how much rates will rise this year, for competitive reasons.
Rates don’t track with claims exactly, according to the Department of Insurance. The companies generally set rates based on five years of claims experience, except for disasters, which they average over a 20-year cycle.
But each company uses a slightly different model.
State Farm, the state’s largest insurer, had a much lower premium increase in 2012. Spokesman Gary Stephenson said the company simply charged what it thought appropriate based on its experience.
“We would use 2011 as part of our 20-year average, so that could impact that average going forward somewhat,” he said.
Jim Newhouse, owner of M&M Insurance Associates, a local multiline agency, said that many residents had a general idea this was coming.
“Living here in Wichita, they are not surprised,” Newhouse said. “They expected an increase. They understand these companies are spending all this money, and there has to be money coming back in to repay them.”
But others, he said, still may not know because they never get a bill. Instead, the premium is lumped in with their mortgage payments.
The customers who call are price-, company- and feature-shopping
He said that as prices rise, customers adjust by reducing the amount of coverage, either by raising deductibles or moving to less-than-full-replacement cost.
He is hoping for a respite from price increases.
“If we get by this spring and summer without a huge storm, they may leave us alone for a year,” he said.