Filing just a few claims can be risky

Rising construction costs, weather losses, and a poor investment climate have made insurance companies wary of anyone who files claims with any frequency. At most companies, that's anyone who files more than one claim every eight years, the industry average.

By that definition, James and June McCloy of Rockport were positively claim-crazy. On a rental property they own in Newton, the couple had filed claims in 1996 (tree on roof), 1997 (pipe break in basement), and 1999 (boiler leak).

They inquired about a possible claim last year related to a water heater leak but decided not to file.

June McCloy says the claims were all legitimate and quickly approved by their insurer, One Beacon Insurance of Boston. She says she learned there was a problem only last month when the company told her the policy would not be renewed this month because of the number of claims.

"None of these things were huge, and all of a sudden they cancel," she said. "That's why I thought I was paying my premiums -- to cover these types of events. They were just things that happened. I'm shocked that the company reacted this way."

Her agent told her it was unlikely other insurance companies would cover her, so she'd have to buy her coverage from the state's insurer of last resort, the Massachusetts Property Insurance Underwriting Association.

The agent estimated the annual premium on the Newton home would increase by a little over 11 percent.

Maggie Sheehan, a spokeswoman for One Beacon, said she couldn't discuss an individual's account. But she acknowledged home insurance nonrenewals have become more frequent as One Beacon tightens its underwriting standards.

"Every insurance company has a point where they have to determine whether they can insure a risk properly and profitably," she said. "It all comes down to the number of claims, the size of the claims, and the frequency of filings."

Loretta Worters, a spokeswoman for the Insurance Information Institute in New York, said industry surveys indicate companies choose not to renew 3 to 4 percent of their homeowner policies.

She said nonrenewals are triggered by the frequency and severity of past claims and even inquiries that don't result in claims. "People who made claims in the past, for whatever reason, are much more likely to make claims in the future," she said.

From One Beacon's perspective, the McCloys were not rewarding customers. The couple had been paying premiums of roughly $719 a year on their Newton rental property, yet their three claims in the late 1990s totaled $8,114, more than three times what One Beacon had collected over the same period.

Unlike auto insurance, where companies are required to insure anyone who walks in the door, home insurers are free to pick and choose, although they must give notice when they plan not to renew coverage.

For years, home insurers have been selective, but balance sheet troubles seem to have made them more discriminating.

Last year, for example, home insurers paid out $3.5 billion more for expenses and losses than they received in premiums. Insurers look to investments to ease the pain, but the sagging stock market of the last two years has offered little comfort.

"In general, the industry is more restrictive right now because of what's happened the last two years," said Jack Golembeski, president of the Massachusetts Property Insurance Underwriting Association, which is funded by the state's home insurers.

The association, which tends to offer competitive rates in urban areas, where insurers are reluctant to provide coverage, and less competitive rates in suburban areas, has seen its business rise 15 percent in each of the last two years. It now insures 99,000 properties in Massachusetts.

Golembeski said some of the increase comes as insurers refuse to cover homes with dogs, swimming pools, or trampolines. But insurers' concern over the frequency of claims has also been a factor.

The McCloys, like many homeowners whose policies are not renewed, were furious because they felt they were being branded as bad apples when they had done nothing wrong. June was so angry that she switched insurance agents. Her new agent discovered that Travelers Insurance would cover the Newton property because there had been no paid claims in the past three years. By insuring both their homes with Travelers, the McCloys actually saw their overall premium drop 4 percent.

Edgar Sidon, the McCloys' new agent and the owner of Commonwealth Insurance Agency in Lowell, said homeowners should always shop around for insurance because companies constantly revise their underwriting policies.

To avoid nonrenewals, Sidon and others in the industry also advise homeowners to maintain their homes properly, purchase insurance with the biggest deductible they can afford (a minimum of $500), never use insurance for maintenance purposes, and file claims sparingly.

"You're buying for the catastrophe, for the big claim," Sidon said. "You should be careful to use it only when you really need it."

Lipton bag job Phil Salmon, a big Lipton tea drinker from Boxford, says he noticed recently that the number of tea bags in a box had been cut from 24 to 20 but the price was unchanged at $2.89.

A customer service representative for Lipton, which is owned by food giant Unilever, confirmed the boxes were redesigned so they would be easier to use and store for both retailers and consumers. She was less forthcoming on why the price didn't drop along with the number of bags, saying only that the company wanted to keep the product in the same general price category.

Salmon translated: "It's another price increase that Lipton hoped the public would not notice.

Bruce Mohl can be reached at mohl@globe.com.