Nebraska, Iowa Residents See Rising Rates

Residents of Nebraska and Iowa are going to have to dig deeper into their wallets as home insurance companies are increasing rates for most Nebraskans and Iowans.

According to the Omaha World-Herald, damage from three years’ worth of severe hailstorms has added to the increase, as well as losses that insurance companies were hit with on their investments in the stock market and elsewhere.

Through the first six months of 2001, home insurance companies paid out $2 in claims for every $1 collected in premiums.

Some homeowners are paying more already, and others will see rate jumps through next May, according to information the companies have filed with state regulators in Nebraska and Iowa.

Although insurers can’t directly raise rates because of investment losses or a single catastrophe, any expense that cuts into an insurer’s finances can add to higher rates.

A company that’s making lots of money on investments may be able to keep rates low or offer rate discounts, for example. But discounts can disappear if investments do poorly.

In July, State Farm increased insurance rates by an average of 1.3 percent for its 110,000 Nebraska homeowner customers and 3 percent for its 165,000 Iowa customers. Each state’s rates are determined separately based on past claims, repair costs, type of home construction and other factors.

The direct cost of the attacks is being absorbed almost entirely by a small number of reinsurance companies – large multinational companies that assume large amounts of risk by buying up groups of policies issued by retail insurers. The General Re division of Omaha-based Berkshire Hathaway, for example, has calculated its losses from the terrorist attacks at $2.28 billion.