Major hurricanes, such as the ones that have ravaged the Gulf Coast states in the past two years, have had a significant negative impact on consumers' feelings about their homeowners insurance in those states, according to the J.D. Power and Associates 2005 Homeowners Insurance Study.

For the homeowners insurance industry overall, customer satisfaction has remained stable compared with the 2004 study. However, satisfaction levels differ significantly from state to state.

For example, in Florida, where four major hurricanes occurred in 2004, claims satisfaction is almost 10 percent lower than the rest of the nation.

Recent catastrophes coupled with serious underinsurance of properties create the potential for disappointed customers as claims are settled. Although study respondents indicate theyve owned their primary residence for an average of 16 years, only about one-half of homeowners have had their homes replacement cost value updated in that time.

Compounding the problem for consumers and carriers alike, home improvement projects often increase a homes value. According to the study, while 41 percent of homeowners reported they made significant structural changes to their home, 37 percent did not notify their insurer of these changes.

"As many hurricane victims are unfortunately learning, a homes replacement cost value can change greatly over the years," said Kevin Keegan, insurance practice leader at J.D. Power and Associates. "Homeowners need to take an active role in reading and understanding their policy, and make changes if necessary, to make sure theyre sufficiently covered for the value of their home and its contents."

The study finds that 25 percent of homeowners do not know which type of homeowners insurance policy they have, and another 24 percent mistakenly believe that they have a guaranteed replacement cost policy that would pay for whatever it costs to rebuild the home without any limits.

Furthermore, 59 percent of homeowners insurance customers dont feel responsible for the coverage limits, but rather believe the insurance provider or their agent bears the responsibility in determining the replacement cost needed to rebuild their property.

"This presumption that the agent or carrier is responsible for determining replacement costs no doubt influences many customers to believe that they bear no exposure, even if their propertys replacement cost value has increased," Keegan said.

"While the agent or representative should carefully educate clients regarding property valuation, ultimately, it is the customers responsibility to understand the nature and limits of the coverage being offered. The homeowner and the insurance company must work together to make sure the right policy and coverage is in place, he added.

The 2005 study reveals that customers whose coverage is periodically reviewed are significantly more satisfied, even though it may be accompanied by an increase in premium.

Provider Rankings

Among homeowners insurance providers, Amica Mutual ranks highest in overall homeowners insurance customer satisfaction for a fourth consecutive year. Amica is followed by State Farm, which records a 14 index point improvement from 2004. Erie Insurance Group, MetLife and The Hartford, respectively, round out the top five providers in the study.

USAA achieved a higher satisfaction score than Amica, but is not included in the ranking because it is an insurance provider only open to the U.S. military community and their families.

"With satisfied customers comes customer loyalty," said Keegan. "Amica Mutuals customers have been with the carrier for an average of 18.6 yearsmuch higher than the industry average of 12.7 years."

Bundling Services

The ability to bundle two or more insurance policies with the same carrier, such as homeowners and auto, also leads to increased customer loyalty. The average satisfaction index score among customers who bundle is 13 percent higher than non-bundlers.

"Bundling makes it very easy for the customer, essentially providing one-stop shopping," Keegan said. "One risk to the provider is that if a customer becomes dissatisfied and shops for another homeowners provider, they likely will switch their other insurance policies at the same time."

The 2005 Homeowners Insurance Study is based on responses from 9,040 homeowners insurance policyholders across the country.