Wall Street Journal – Officials at the state and federal level are concerned that insurers have been charging too much for something known as “force-placed insurance,” which takes the place of a lapsed policy.

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The National Flood Insurance Program, which provides insurance subsidies for homes in flood-prone areas expired in September.  However, Congress passed a temporary extension and that is set to expire Friday.  A new study from the Risk Management and Decision Processes Center at the Wharton School at the University of Pennsylvania claims a private flood insurance option is not only possible, but potentially more affordable for homeowners.

The idea of reforming NFIP to involve private insurers picked up momentum in the past few months, prompting the Risk Management Decision Processes Center to analyze the concept of allowing private insurers to take an active role in insuring more of the homes.

To date, the NFIP is the primary insurer of at-risk properties in flood plains.

The program covers 5 million households, or roughly $1.25 trillion of property value, the Wharton study concluded. But with the NFIP now $17.8 billion in debt, the economists studied the costs of allowing private flood insurance to pick up the slack in the market.

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Wall Street Journal – Homeowner policies have important differences that can affect whether claims are paid, according to a study scheduled to be published early next year in the University of Chicago Law Review.  The problem is that those differences are poorly understood.

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Wall Street Journal – Already plagued by stubbornly low home prices, homeowners soon may be facing another blow: rising insurance premiums.

After five years of relatively stable premiums, some of the country’s biggest insurers have raised rates—or say they plan to. Premiums vary by state, but last year, State Farm Mutual Automobile Insurance Co. says it increased homeowners rates 7.3% on average and, this year, has raised them in 18 states, including a few by more than 7%. By contrast, it cut rates in just two states.

In Florida, upscale insurer PURE Risk Management raised premiums 11% this year. Fireman’s Fund Insurance Co., a subsidiary of Allianz SE, says it has started to raise premiums in some areas. For some Pennsylvania homeowners, premiums shot up 33% last year.

For homeowners, the increases may seem counter-intuitive. Why are they paying more to protect a house that may have lost significant value? Insurers say premiums are partly based on rebuilding costs, not on a home’s appraised market value. When energy and building-material costs rise, insurers sometimes raise premiums, said Mike LaRocco, chief executive of Fireman’s Fund Insurance. Even with the recent decline in commodities prices, gasoline is up 37% in the past year, copper is up about 20% and plywood is up around 8%.

There may be more premium increases on the way, experts say, given the rising toll of natural disasters, including recent tornadoes and extreme weather in the U.S. and the earthquake and tsunami in Japan in March.

New risk models also are causing insurers to reassess rates, said PURE President and CEO Ross Buchmueller. A new hurricane model used widely across the industry forecasts a higher “wind risk,” even for homes far from the coasts, driving premiums higher.

Federal flood-insurance prices may rise as Congress looks to erase the remaining $18 billion deficit from Hurricane Katrina. One congressional proposal would raise the limit on annual premium increases to 20% from 10% and make it harder for the most flood-prone properties to get coverage. The average flood premium is about $600 annually; rates go to nearly $6,000 for the highest-risk coastal properties, the National Flood Insurance Program says.

All this may be a shock to homeowners, who have gotten used to premiums kept stable by the absence of big storms and costly disasters since Hurricane Katrina caused insured losses of more than $45 billion in 2005. The recession and decline in home construction also sapped demand for insurance, according to industry researcher Insurance Information Institute. The average annual premium for homeowners’ insurance fell 3.8% to $791 in 2008 from 2007, Institute figures show. It estimates the average premium rose to $807 last year.

There may be little home owners can do, beyond the usual shopping around. Jack Powers, an independent agent at Gulfshore Insurance in Naples, Fla., says some of his customers face rate increases of 20% or more. Still, he advises many of them to swallow the increases. The alternatives, he says, are smaller, unrated insurers that may not withstand a storm financially.

California Insurance Commissioner Dave Jones this week urged Californians to update their earthquake preparedness plans and evaluate the need for earthquake insurance.

“On this 17th anniversary of the Northridge earthquake, let us be reminded that we live in a region of the country that is constantly in flux,” said Commissioner Dave Jones. “While it was certainly a tragic event that impacted many Californians, we must be even more prepared for the next big earthquake that scientists say may come at any time.”

Earthquake preparedness includes the following:
• Review your insurance policies at least once each year with your agent or broker to ensure that they provide adequate coverage.
• Consider purchasing an earthquake policy if your home is in an earthquake-prone area, doesn’t meet current building standards, or is built upon unstable ground.
• Take measures to retrofit your home to increase your safety during an earthquake.
• Brace your water heater to minimize the risks of fire and water damage caused by water heaters that topple during earthquakes.
• Bolt your home’s wood frame to its foundation to prevent damage resulting from the structure sliding off its foundation. And for houses on raised foundations, brace of “cripple walls” to reduce damage from earthquakes.
• Mobile home owners should use earthquake-bracing systems to reduce the chance of damage from homes slipping off support jacks.
• Fasten cupboard doors with child-proof latches to prevent them from opening and spilling their contents.
• Fasten bookcases, mirrors, televisions, and other tall or heavy objects to wall studs.
• Gas appliances should have flexible attachments, and family members should be familiar with gas shut-off techniques.

Most homeowners’ and renters’ policies do not cover damage from earthquakes. The California Earthquake Authority was formed to provide earthquake insurance to residential property owners including homeowners, individual condominium unit owners, mobile homeowners, and renters. Under the CEA plan, the CEA member insurance company is required to offer earthquake coverage subject to the minimum dwelling and personal property. Dwellings must be covered according to CEA policy guidelines; however, other structures such as outbuildings, swimming pools, and masonry fences are specifically excluded, as is the case with the majority of earthquake policies. CEA has more recently offered broader coverage in response to growing claim reserves and positive reports of plan solvency.

Earthquake coverage can not be purchased directly from CEA. CEA does not offer stand-alone earthquake policies. Only licensed California insurers who are CEA-member companies can sell CEA policies.  A residential property policy must be in force or homeowners must purchase a new residential property policy from a CEA member insurer in order to be offered a CEA policy. The residential insurance companies participating in CEA currently underwrite more than 70 percent of the residential property insurance sold in California. A participating CEA company can only offer CEA policies.

Get important information about preparing for a disaster from the California Department of Insurance website at www.insurance.ca.gov. Or, call its consumer hotline at (800) 927-HELP.

MSNBC - If you’re a homeowner, chances are your house is worth less than it was five years ago. But you could still be paying more to insure it.

Despite the deep housing bust of the last few years, the cost of rebuilding a damaged home — in other words, what you pay insurance for — has not changed much, according to industry experts.

That means that unless you have reduced coverage or increased your deductible, chances are you are paying as much or more to insure your home as before the housing bust.

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