ATLANTA (AP) - As Georgians struggle to cope with an ongoing recession, their car and home insurance rates are on the rise.
Hit hard by storms and losses on Wall Street, insurance companies have been hiking their rates this year in Georgia and in other states.
According to the Georgia Department of Insurance, four of the largest insurance companies operating in Georgia are raising their average homeowners' insurance rates by 5 to 11 percent this year.
The rate hikes by State Farm, Cotton States, First Liberty Insurance Corp. and Nationwide Mutual Fire Insurance were approved by the agency and affect nearly 40 percent of the state's homeowners, The Atlanta Journal-Constitution reported on its Web site Saturday.
Auto insurance rates are rising but not quite as steeply. The median rate hike among changes filed by about two dozen companies has been 2.4 percent.
Despite the increases, Georgia Insurance Commissioner John Oxendine told the AJC consumers are doing better than in other states, where rates have gone up by double digits.
Insurers are regulated at the state level. Press reports have show that they have been raising rates in other states, including Illinois, Texas and Florida, while rates have dropped in some other states, like Ohio.
Some industry experts say it's not entirely clear which way premiums are going.
"The situation at the moment is a little bit complicated because supply and demand are both moving," said Michael Murray, assistant vice president of financial analysis at the Insurance Services Office, a New Jersey-based company that tracks insurance industry statistics.
The federal Bureau of Labor Statistics' price index for homeowners' insurance rose 1.9 percent in April compared to a year earlier, he said. The agency's auto insurance index was up 4.7 percent during the same month.
Martin Grace, a Georgia State University professor of insurance and risk management, said homeowners' insurance rates are likely to rise in coastal areas that are vulnerable to hurricanes.
Georgia homeowners' insurance rates may also be rising faster as insurers play catch-up to increase rates that have been below the national average, he said.
But Georgians have been paying higher than the national average for auto insurance. Grace said rising costs of auto repairs are likely behind the increase in auto insurance rates this year.
He and other experts believe insurers may have a hard time raising revenue by much this year because customers are holding off on buying newer, more expensive cars or bigger homes that might up their insurance costs.
Murray said huge losses from storms, like Hurricane Ike, which hit the Texas coast, drained much of insurers' capital. That reduced their ability to finance future insurance contracts. Last year, the industry's net worth dropped to $456 billion from almost $518 billion at the end of 2007.
Boom-and-bust cycles are typical for property and casualty insurance companies, which alternate between "soft" markets when insurance is easy to get and "hard" markets when it's harder to get and rates spike.
Industry and government data indicate those spikes frequently come a few years after the country comes out of a deep recession.
Hurricanes and a plunging investment market dealt the worst losses to the insurance industry since 2002, but they industry had enough capital to absorb those losses, Murray said. But things could go bad "if we do get another Ike or Katrina or the market tanks," he said.