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Mounting toll of natural disasters is partly to blame for rising home, auto insurance

STEVE INSKEEP, HOST:

If you haven't looked at your insurance bill lately, just don't. Home and auto insurance premiums have been climbing at double-digit rates throughout this country, even as overall inflation has been coming down. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Ezra Croft has never filed an insurance claim, and his house in Raleigh, N.C., isn't close to a stormy coastline or a fire-prone forest. So Croft was surprised when his annual homeowners insurance premiums shot up to $1,600, $700 more than he was paying just a couple of years ago.

EZRA CROFT: I'm a middle-income guy, don't make a ton of extra money. At this point, I'm teetering on the point of inaffordability.

HORSLEY: North Carolina's insurance commissioner has gotten tens of thousands of similar complaints. Croft went to a hearing last month where there were lots of unhappy insurance customers.

CROFT: Every single person there was furious and scared and confused.

HORSLEY: Similar pain is being felt all over the country, as insurance companies tries to raise homeowners' premiums by more than 11% last year. Auto insurance premiums are climbing even faster, according to S&P Global Market Intelligence. Paul Morro in Herndon, Va., says the cost of his family's auto insurance just jumped by $600 a year.

PAUL MORRO: Here's the kicker. My wife and I both work from home, so we have no commute to speak of. It just feels like everything is rising at a scary rate.

HORSLEY: Insurance companies insist they're just playing catch-up after two years of big losses. Sean Kevelighan, who heads the Insurance Information Institute, says for every dollar companies collected last year in home and auto premiums, they paid out $1.10.

SEAN KEVELIGHAN: Nobody wants to have that higher price bill. But insurance does need to price insurance according to the risk level that's out there.

HORSLEY: Inflation is partly to blame for those big payouts. Fixing or replacing damaged homes and cars has gotten more expensive, but insurers are also having to contend with a mounting toll of natural disasters, and not just in the usual places like Florida and California. S&P's Tim Zawacki says there were nearly two dozen billion-dollar storms last year, spreading lightning, hail and damaging winds through many parts of the country.

TIM ZAWACKI: While a lot of these storms don't make national headlines, they do tend to be very costly at the local level, and the sort of breadth of where these storms are occurring is something that I think the industry is quite concerned about.

HORSLEY: As a result, insurance premiums are likely to keep climbing this year, even as overall inflation cools. Doug Heller, who tracks insurance for the Consumer Federation of America, says while state regulators have some power to limit those price hikes, insurance companies have a lot of leverage and tend to get their way.

DOUG HELLER: The insurance companies have become really aggressive kind of in their bullying. You've heard a lot about companies that are threatening to pull out of the market if they don't get what they want. Generally speaking, that bullying has worked.

HORSLEY: Heller says customers can sometimes save money by shopping around. Alicia Pitorri switched insurers after the cost of her family's auto policy jumped more than $1,000.

ALICIA PITORRI: It was Liberty Mutual. We've since switched to State Farm since the renewal went up so much.

HORSLEY: Pitorri, who lives in Nashville, says while she managed to shave a few hundred dollars off the bill, she's still paying a lot more than she was two years ago.

PITORRI: I shopped a lot, and no matter what, it was going to be a price increase. What can you do, you know? You need insurance. You can't have a vehicle or a house without them, so you have to pay for it. And you figure out where you can cut other things to make sure that you can drive around.

HORSLEY: Auto insurance is required in most states, and so is homeowners coverage if you have a mortgage. Still, as the cost of insurance goes up, more people are scaling back their coverage or even going without. The Consumer Federation's Heller warns, that's dangerous.

HELLER: We are very concerned that the escalating premiums are going to lead to escalating rates of uninsured drivers and homeowners, which makes us all quite vulnerable. Insurance is the way that we deal with a risky world.

HORSLEY: And while the price of repairs and replacement may moderate over time, the risk of severe weather only seems to be getting worse.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.