Homeowners’ Insurance: It Pays to Shop
The first price survey of homeowners’ insurance in California was released Monday by the state Insurance Department and, as with auto insurance, the lesson to consumers was clear: It pays to shop around.
In homeowners’ insurance, the price differences between ZIP codes and between companies within the same ZIP code tend to be less than in auto insurance. But there still are instances in which one company is charging homeowners twice as much as another company in the same ZIP code area, and many cases in which there are price variances of 25% to 30%.
In the most populous areas of Southern California, the annual rates quoted by the biggest homeowners’ insurance seller statewide, State Farm, were higher than those quoted by the No. 2 seller, Farmers, while the No. 15 seller, 20th Century, usually had the lowest rates of all. SAFECO, the No. 4 seller, also usually had low rates in comparison with others.
Highest in Deprived Areas
As with auto insurance, the survey showed that the rates tend to be highest in the most economically deprived areas.
Most companies included in the survey charge their highest rates in the predominantly black and Latino South-Los Angeles ZIP code of 90001, for instance. Insurance industry spokesmen said this is because the incidence of theft, arson and claims against policies are highest there.
The price survey covered the 20 biggest sellers among hundreds of companies offering homeowners’ insurance in California. Prices were listed for at least one ZIP code in each of the state’s 58 counties and in more than one area in each of the big Southern California urban counties.
Three separate types of policies were cited in the survey, one for a comparatively new home of high value, one for a 25-year-old home of moderate value and one for a 45-year-old home of lower value.
(The chart accompanying this article shows the 15 largest sellers who together sell more than half of the total homeowners’ insurance in the state, and uses the first two policy examples, chosen for being the most typical.)
State Insurance Commissioner Roxani Gillespie said the purpose of the survey, which she said will be done annually, is to make Californians more aware of the potential for saving money in choosing insurers.
“I don’t know how many people are really aware of their homeowners’ policy,” Gillespie said. “Sometimes, it gets buried with their mortgage payments, and they don’t bother to scout out other coverage possibilities. Yet they can have savings, if they shop around.”
Cheaper, Less Inflation
Consumers generally do not pay as much attention to their homeowners’ insurance as they do to their auto insurance, in large part because it is cheaper and there has been far less inflation in homeowners’ rates in recent years.
In fact, just since July, three of the 20 companies in the survey--Continental (Fire Insurance Co. of Newark), Transamerica and Reliance (United Pacific)--have lowered their rates slightly, while only one, Allstate, has raised its rates.
Gillespie pointed out that many more of the claims in auto insurance involve liability, where there tends to be far more litigation, while in homeowners’ insurance, the claims are often for property losses.
“What happens in a burglary in the home is not as big a loss usually as a broken back, or an expensive car, or part of a car, in an auto accident,” she explained. “Those losses are greater than someone coming in and stealing your wedding ring.”
Auto Insurance Fraud
She added that fraud has become a far more serious problem in auto insurance than it is in homeowners’ insurance and has also been responsible for driving up the auto rates.
The same point was made by Timothy Dove, regional manager for the Insurance Information Institute, an industry trade group. “Ten percent to 40% of auto insurance premiums can be traced to fraud,” he said.
“Fraud has become a big business in a lot of parts of the country in auto insurance,” he said. “Homeowners are far more subtle in fraud, and it’s not as big in that type of insurance.”
Spokesmen for several companies were asked why some companies charge so much more for insurance in given areas than others. The most frequent answer was that some companies are willing to write more bad risks. This increases the claims, and ultimately the rates, as compared with other companies that screen out all but the best risks.
Avoid Commissions
Some companies, it was added, such as 20th Century, hold down rates by not using agents and selling the insurance directly, thereby avoiding commissions.
Pete Ingham, associate general counsel of State Farm, said he believed that the reason State Farm’s rates tended to be higher than Farmers, 20th Century and some other companies is “perhaps we haven’t been as selective in the homes we’re willing to insure.
“They market differently than we do,” he said of 20th Century. “Their homeowners are probably often the same as their (preferred best risk) drivers. . . . I suspect some of these other companies are rather restricted in their writing too.
“We’ve been generally available to everyone. The possibility exists we should have been more careful on our underwriting (not take so many bad risks).”
‘Selection Process’
Rick Dinon, vice president of corporate relations for 20th Century, readily acknowledged the validity of Ingham’s points, saying, “I do know that 20th Century has a relatively careful selection process.”
He added that 75% of 20th Century’s homeowner policyholders also have auto insurance with the firm. “We generally have a very, very high quality insured (policyholder), and part of that (auto business) flows to the homeowner product as well,” he said.
“We also . . . inspect a high percentage of the homes themselves . . . and we (avoid) areas with natural hazards, such as slide areas, brush areas, flood plains.”
Jerry Clemans, a spokesman for Farmers, said his company’s rates may have shown up better than State Farm’s because it offers discounts to nonsmokers and seniors and it quoted its “best prices” to the Insurance Department.
Best Prices
The survey description released by the department, however, made it clear that each company had been invited to submit its best prices.
Another reason for price differentials was stated by Dove of the Insurance Information Institute: namely that different companies follow different market strategies, choosing to do more business in certain areas than others.
“Their prices may reflect what markets they are aiming at,” he said. “Some choose to be better priced in the north than in the south.”
The survey showed that unlike auto insurance, homeowners’ rates tend to about as high in the rural counties of Northern California as in most of the urban ones of Southern California.
State Farm, for example, charges an annual premium of $717 for a new, higher-valued home in rural, mountainous Sierra County and $688 in rural Siskiyou County, while it charges $618 for the same kind of home in Glendale and $700 in Long Beach.
Balancing Rates
The disparity in auto insurance rates between the rural and urban areas can be 300%. Some industry spokesmen said that in homeowners’ insurance, the fire departments tend to be more efficient in urban areas, balancing off a higher rate of thefts.
Among five companies listed in the survey that are not on the Times chart, ranking between 15 and 20 as sellers in the state, Oregon Mutual tends to be on the low side, while Travelers (Phoenix) tends to be high. The others are usually somewhere in the middle.
COMPARATIVE HOMEOWNERS’ INSURANCE RATES: SOUTHERN CALIFORNIA The California Department of Insurance made public these comparative homeowners’ insurance rates for selected ZIP code areas in Southern California. These 15 insurance companies sell more than half of all homeowners’ insurance in the state. These rates were those in effect in July, 1987.Rates to individuals will vary based on their own claims, or loss, experience, as well as the amount of coverage they buy. Annual rates for Homeowner 1, who is described below, are in light type; rates for Homeowner 2 are in bold type with asterisk.
HOMEOWNER 1 (FIGURES ARE IN LIGHT TYPE)
Homeowner 1 lives in a single-family frame dwelling, built in 1982 (5 years old). There have been no losses within the last three years. There is a $500 deductible. Coverages are $200,000 on the dwelling, $20,000 on other structures, $100,000 on replacement of contents, $40,000 additional living expense, $300,000 personal liability and medical payments of $1,000 for each person and $25,000 for each accident.
HOMEOWNER 2 (FIGURES ARE IN BOLD TYPE WITH ASTERISK)
Homeowner 2 lives in a single-family frame dwelling, built in 1962 (25 years old). There have been no losses within the last three years. There is a $250 deductible. Coverages are $125,000 on the dwelling, $12,500 on other structures, $62,500 on replacement of contents, $25,000 additional living expense, $100,000 personal liability and medical payments of $1,000 for each person and $25,000 for each accident.
RANKING COMPANIES In order of business sold in California:
State Farm Farmers Allstate Safeco Calif. State Auto Assn. (AAA) Firemans Fund (Assoc. Indemnity) Chubb Group Aetna Blue Ridge Prudential Property Transamerica Reliance (United Pacific) West American (Ohio Casualty) All West (Industrial Indemnity) 20th Century
Calif State City/ All Blue Auto Chubb ZIP Code Aetna Allstate West Ridge Assn. Group Farmers LOS ANGELES COUNTY Glendale 637 712 618 676 725 674 564 91208 494* 462* 420* 461* 469* 480* 399* Long Beach 743 893 715 666 725 672 594 90806 539* 573* 488* 453* 469* 479* 429* Los Angeles 668 893 632 936 725 716 823 90001 518* 573* 470* 641* 469* 509* 589* Pasadena 586 712 618 666 725 674 615 91107 458* 462* 420* 453* 469* 480* 452* Pomona 586 646 618 594 725 674 559 91766 458* 419* 420* 403* 469* 480* 396* Santa Monica 605 584 618 666 725 674 537 90405 468* 373* 420* 453* 469* 480* 400* Torrance 605 584 618 637 725 674 543 90503 468* 373* 420* 433* 469* 441* 400* ORANGE COUNTY Anaheim 542 531 606 526 694 484 481 92801 418* 347* 348* 357* 452* 342* 365* Hunt. Beach 460 556 606 526 694 484 430 92648 361* 365* 348* 357* 452* 342* 327* Santa Ana 542 531 606 594 694 484 481 92704 418* 347* 348* 403* 452* 342* 365* RIVERSIDE COUNTY Riverside 508 600 696 637 694 535 556 92501 376* 395* 473* 433* 452* 379* 439* SAN BERNARDINO COUNTY Ontario 508 630 696 541 694 535 556 91761 376* 412* 474* 366* 452* 379* 439* San Bernardino 508 600 696 637 694 535 556 92408 376* 395* 474* 433* 452* 379* 439* SAN DIEGO COUNTY San Diego 481 447 505 547 694 511 497 92113 370* 281* 341* 371* 452* 361* 369* Chula Vista 426 482 470 547 694 435 497 92011 332* 300* 317* 371* 452* 308* 369* SANTA BARBARA COUNTY Santa Barbara 388 421 458 459 694 392 395 93101 298* 277* 309* 310* 452* 276* 290* VENTURA COUNTY Oxnard 429 449 458 459 694 484 416 93030 336* 298* 309* 310* 452* 342* 331*
Reliance City/ Firemans Prudential (United State ZIP Code Fund Property Pacific) Safeco Farm LOS ANGELES COUNTY Glendale 564 549 648 629 618 91208 398* 406* 486* 394* 429* Long Beach 516 486 622 635 700 90806 354* 376* 470* 392* 465* Los Angeles 576 812 959 811 1002 90001 425* 639* 689* 525* 661* Pasadena 561 581 648 592 700 91107 395* 454* 486* 373* 465* Pomona 565 581 648 592 736 91766 388* 454* 486* 373* 504* Santa Monica 567 515 648 629 616 90405 390* 381* 486* 394* 445* Torrance 567 515 590 592 616 90503 390* 381* 448* 373* 445* ORANGE COUNTY Anaheim 521 542 545 628 673 92801 357* 401* 415* 399* 439* Hunt. Beach 497 542 545 552 602 92648 340* 401* 415* 337* 400* Santa Ana 521 539 545 628 673 92704 357* 399* 415* 399* 439* RIVERSIDE COUNTY Riverside 558 557 594 730 731 92501 393* 434* 452* 470* 491* SAN BERNARDINO COUNTY Ontario 558 557 594 457 731 91761 393* 434* 452* 299* 491* San Bernardino 558 546 594 730 731 92408 393* 425* 452* 470* 491* SAN DIEGO COUNTY San Diego 499 484 566 511 613 92113 342* 356* 432* 313* 413* Chula Vista 458 440 653 415 613 92011 322* 339* 490* 271* 413* SANTA BARBARA COUNTY Santa Barbara 341 419 415 362 466 93101 238* 307* 315* 220* 326* VENTURA COUNTY Oxnard 341 419 415 363 499 93030 238* 307* 315* 228* 350*
City/ 20th West American ZIP Code Transamerica Century (Ohio Casualty) LOS ANGELES COUNTY Glendale 670 428 553 91208 443* 326* 332* Long Beach 657 469 504 90806 435* 339* 324* Los Angeles 681 607 620 90001 452* 447* 373* Pasadena 670 469 562 91107 443* 339* 337* Pomona 670 434 553 91766 443* 322* 322* Santa Monica 681 427 623 90405 452* 321* 375* Torrance 681 427 597 90503 452* 321* 359* ORANGE COUNTY Anaheim 514 430 525 92801 329* 303* 338* Hunt. Beach 514 395 489 92648 329* 277* 314* Santa Ana 514 430 525 92704 329* 303* 338* RIVERSIDE COUNTY Riverside 639 434 612 92501 367* 322* 363* SAN BERNARDINO COUNTY Ontario 639 434 612 91761 367* 322* 363* San Bernardino 639 434 612 92408 367* 322* 363* SAN DIEGO COUNTY San Diego 503 371 529 92113 321* 276* 317* Chula Vista 482 371 529 92011 306* 276* 317* SANTA BARBARA COUNTY Santa Barbara 471 363 421 93101 297* 276* 269* VENTURA COUNTY Oxnard 471 363 422 93030 297* 276* 269*
DIFFERENCES AMONG THE COMPANIES Some companies have changed their rates since July:
Allstate implemented a general rate increase of 5.6%, effective Sept. 7, 1987.
Transamerica had a general rate decrease of 1%, effective Oct. 1, 1987.
Reliance (United Pacific) had a general rate decrease of 5%, effective in August, 1987. Some companies have discounts, credits, options or fees:
All of the companies offer discounts for protective devices in the home.
All of the companies offer new home credits.
All of the companies offer deductible credits.
All West (Industrial Indemnity), the Chubb Group, State Farm and West American (Ohio Casualty) offer superior construction credits.
Farmers offers a 4% nonsmoker discount.
Allstate, the California State Auto Assn. (AAA), and Farmers offer a senior credit.
All of the companies except for All West (Industrial Indemnity) and 20th Century offer a buyback deductible.
All of the companies except for All West (Industrial Indemnity) offer installment plans.
The California State Auto Assn. (AAA) and Farmers have membership fees.
