And when is the last time the cape had a devastating hurricane?
June 2, 2006
Insurance costs soar on Cape homes
By CHRISTIE SMYTHE
Staff Writer
It may be the frying pan or the fire for many Cape and Islands home-owners this year when it comes to the cost of property insurance.
Not long after a slew of insurers began dropping policies in the region because of the potential for major storm damage, many of the homeowners who managed to retain their policies are now in for an unpleasant surprise: Their rates will take a big hike.
At least four of the region's remaining insurers are in the midst of increasing premiums by as much as 200 percent.
Among those raising rates are The Patrons Group, Quincy Mutual Fire Insurance Co., The Norfolk & Dedham Group and AIG. Some rate increases took effect recently, and others will be implemented in coming weeks.
According to local insurance agents, rates are going up by as much as 200 percent for The Patrons Group; 70 percent for Quincy Mutual; and 66 percent for AIG Private Client Group. AIG is one of only a few companies that still insures Cape homes with a replacement cost of more than $1 million.
Norfolk & Dedham is increasing its premiums more modestly, by ''a couple hundred dollars per policy,'' according to company president Tim Hegarty. Norfolk & Dedham, which has about 4,000 Cape and Islands policies, will probably continue to raise rates in the future, he said.
Company representatives would not provide specifics on the premiums they currently charge Cape customers.
The rate increases are coming at about the same time that NGM Insurance Co., also known as National Grange, is beginning to notify roughly 2,300 Cape and Islands home- owners it will drop their policies. The Florida-based company is the latest in a string of insurers to withdraw from the region over the past two years.
Other companies have kept existing policies but have stopped taking new Cape customers.
These changes have forced tens of thousands of Cape home-
owners into the Massachusetts FAIR Plan, the state's often more steeply priced insurer of last resort. The FAIR Plan has swelled into the region's largest insurer, now covering 43,000 properties, or about a third of the market. Six years ago, the FAIR Plan had about 6,000 Cape policies.
The first major insurer to bail out of the region was The Andover Cos., which announced in 2004 it would drop about 14,000 homeowners policies.
Potential for damage
Now, Andover is also dropping many of its policies for businesses and rental property owners in the area, according to Kathy Silvia, co-owner of The Fair Insurance Agency in Centerville.
The reasons for the rate increases are largely the same as those behind the exodus of insurance companies from the region, insurance executives and agents say. Newly revised hurricane projections show potential for massive damage here. As such, companies are raising rates to cover the increasing cost of reinsurance, which helps insurers pay claims in large-scale disasters.
''This spring, reinsurance costs have gone up dramatically, more than we expected them to go up,'' Hegarty said.
Hegarty said Norfolk & Dedham is raising its rates in an effort to stay in the territory. Patrons Group, based in Connecticut, is also passing along dramatic rate increases in an effort to stay on the Cape, President Bill Siclari said.
''I'm not making any money from this. Really,'' he said.
Although Siclari would not disclose his company's average premiums, he said, for his own vacation home in East Orleans, his premium is increasing from $1,400 to $2,700.
Patrons Group insures about 1,500 Cape properties and about 5,500 in other coastal areas of Massachusetts.
No relief likely
The FAIR Plan is also expected to increase premiums in the coming weeks. The organization that runs the plan has requested rate increases averaging about 25 percent for the Cape, which may be approved later this month.
The average FAIR Plan annual premium on the Cape now costs about $1,300.
As some insurance companies have ventured back into the Cape market, they have often been charging as much as, or more than the FAIR Plan, local insurance agents say.
After raising premiums by as much as 70 percent, Quincy Mutual will be ''kind of in the middle of the pack'' for rates, Executive Vice President Kevin Meskell said. Quincy Mutual is also dropping about 1,500 of its 6,000 Cape policies.
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The situation for many Cape property owners is growing bleaker as concerns about hurricanes in the Northeast continue to mount. Customers will likely continue to face higher rates, agents say.
''Typically, we say there's a light at the end of the tunnel. I don't know where the tunnel ends,'' Silvia said. Because of the increasing risk, insurance company executives say they often have no choice but to leave the coast or charge higher rates. ''It's pretty clear that a coastal property will suffer the biggest losses in a hurricane,'' Hegarty said.
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