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Archive for Thursday, December 6, 2001

Insurance rates spike

Terrorist attacks accelerate rise in premiums

December 6, 2001

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Harris Construction Co. Inc. is bracing to pay at least $150,000 more for the same insurance coverage next year.

And that means Harris' customers businesses looking to remodel, expand or move into new buildings could be in for a shock.

KAREN SHUMATE, vice president for quality services at Lawrence
Memorial Hospital, says the hospital's premiums for property
insurance are expected to rise as much as 400 percent Jan. 1.

KAREN SHUMATE, vice president for quality services at Lawrence Memorial Hospital, says the hospital's premiums for property insurance are expected to rise as much as 400 percent Jan. 1.

"One way or the other, I have to increase my coverage rate when I bid the work or design-build the work, so my company doesn't get hit," said Kamal Mikhail, president of the Lawrence-based company.

"I have to pass it along to the consumer."

When it comes to coping with increases in insurance rates, Harris is by no means alone.

Across the country, businesses are struggling to decide how to absorb rising insurance costs that already were expected to increase by double-digits but have ballooned to as much as 25 percent to 30 percent since the Sept. 11 terrorist attacks. Some types of insurance are rising even higher.

Insurance companies are facing $40 billion in claims connected to the crashes of hijacked planes in New York, Washington, D.C., and Pennsylvania. Insurance companies' investments already were struggling as the economy slid into recession, but the attacks made a bad situation even worse.

"This is sort of like the straw that broke the camel's back," said Bob Johnson, chairman of Lawrence-based Charlton-Manley Insurance and chairman of the Douglas County Commission.

High-risk properties, such as hospitals and large manufacturing operations, will face especially steeper rates for next year, Johnson said.

Karen Shumate, vice president for quality services at Lawrence Memorial Hospital, said she expects the hospital's rates for property insurance which covers damages for everything from water leaks to a tornado to jump anywhere from 200 percent to 400 percent Jan. 1.

The additional $80,000 to $160,000 cost for the hospital has officials reviewing risk-management and other issues, looking for ways to save money.

Shumate doesn't expect users of the hospital to see increased costs for services because of the rate increases, but the hospital could decide to boost its deductibles to help make ends meet.

"I've seen increases of 40 to 50 percent in the past 10 years, but nothing like this," she said.

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