Insurers Pull Homeowners Policies Due to Storm Fears

March 23, 2006 — -- On Massachusetts' Cape Cod, Doug Azarian hasn't seen a hurricane in years. But he's felt the effects of the Gulf Coast and Florida storms. His private homeowners insurance was not renewed.

"We haven't had damage in 15 years," Azarian said. He believes he's "paying for what happened 1,500 miles away."

All along the Atlantic coastline, insurance rates have jumped, and some homeowners have lost their policies altogether. And there isn't a lot that many can do about it.

Homeowners in parts of Massachusetts have seen their insurance rates jump 75 percent. Insurance companies believe they're at risk. They've paid out billions for Katrina and Rita damage, and they are listening to the weather forecast.

"What's really scary for insurers is, No. 1, the forecasts for upcoming storm seasons are horrific," said Julie Rochman, senior vice president of public affairs at the American Insurance Association. "No. 2, we've got so much building along the coastlines -- these are houses built on sand dunes on barrier islands."

With more hurricanes expected and the northern coastline more vulnerable, according to forecasters, some companies are leaving altogether.

A Growing Trend

In New York, Allstate Insurance will pull out of eight coastal counties, and 28,000 homeowners stand to lose their insurance; those who will still have policies can expect to see their premiums increase by 8.5 percent. It's a story being repeated all along the coastlines.

"Where regulators will allow insurance companies to price according to risk, not only is it fairer but it provides an incentive for people to build smart," Rochman said.

But it's not just Katrina causing the problem. The tsunami and floods all over the world have led the companies that insure the insurance companies to double some rates, a cost the insurance companies are passing on to customers and the reason they give for being forced into difficult choices.

"If you live in a multimillion-dollar house in Miami Beach, it's not a God-given right that an insurance company has to provide you with homeowners insurance for that multimillion-dollar house," said Robert Rusbuldt of the Independent Insurance Agents.

Mary Poss is another Cape Cod resident who has lost her homeowners insurance. Like her neighbors, a state program now provides insurance, but her premium has tripled. And after 30 years, she may be forced to move.

"I don't want to," Poss said. But she says she can't afford to stay.

There's another dire warning from the insurance industry: This may be just the beginning of escalating rates and of some homeowners finding it nearly impossible to get insured.

ABC News' David Kerley reported this story for "World News Tonight."