Auto, HO Rate Changes in the Works in Pennsylvania

March 1, 2004

The industry’s Insurance Services Office, Inc. has asked the Pennsylvania Insurance Department to permit a loss cost decrease of 1.8% on all policies written on or after Dec. 1, 2004 for private passenger automobile insurance.

ISO has also sought an identical decrease in loss costs for homeowners, but with an earlier effective date of Oct. 1, 2004.

Unless formal administrative actions are taken, the changes will go into effect as recommended.

Advisory loss costs represent the portions of rates that do not include most expenses or profit. Individual insurers must file their own expense and profit multipliers.

The last revision of private passenger auto loss costs in the state came on Dec. 1, 2003 for a slight 0.5 percent increase. Prior to that, ISO was granted an overall 7 percent hike in April 2002.

While the overall effect on homeowners rates is a 1.8 percent reduction, the figures vary by policy form: -1.4% on HO-2, 3, 5, 8 (owners); -9.3 percent on HO-4 (tenants); -12.7 percent on HO-6 (unit owners). The sizable decrease on HO-6 policies is, according to ISO, “mainly due to improving experience.”

Loss costs on homeowners last changed on Sept. 1, 2002, when a 1.4 percent raise was implemented.

ISO’s homeowners proposal incorporates hurricane modeled loss costs based on AIR-Worldwide Corp.’s tropical cyclone model.

Some insurance companies file their own recommendations rather than follow ISO’s recommendation. Several weeks before ISO’s filing, Liberty Mutual Fire Insurance Co. requested an overall 5.2% increase amounting to $1.305 million annually, to be effective April 12, 2004, for new and renewal homeowners business.

Unless administrative action is taken prior to March 16, 2004, the Liberty Mutual filing will be allowed.

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