AUGUSTA – The number of Mainers appealing insurance company decisions not to renew their homeowners policies nearly doubled last year. At the same time, rates are continuing to increase dramatically.

“You’ve got like a perfect storm,” said Rep. Christopher O’Neil, D-Saco, co-chairman of the Legislature’s Insurance and Financial Services Committee. “It is a huge issue, and it’s not going away.”

Insurers are scrutinizing policies because they have been hit with huge losses as a result of the terrorist attacks and the decline in the stock market, O’Neil said. Companies have used earnings from investments to hold down premiums in the past, but they no longer have that option, he said.

As a result, companies are now “aggressive” in reviewing existing homeowner policies, as well as applications for new policies.

“We had 220 appeals in 2001,” Maine Insurance Superintendent Alessandro Iuppa said recently. “Last year we had 492.”

He said 350 of last year’s appeals were from homeowners whose policies were not renewed. Most of those appeals, however, resulted in a positive result for the homeowner.

“The insurance company prevailed in 57 of those cases,” he said. “So policyholders do stand a reasonable chance of prevailing.”

The increase in appeals is a result of a trend that began two years ago when insurers began to take a close look at homeowner policies, Iuppa said. As companies actually assessed risks at a residence instead of automatically renewing policies, more notices of non-renewal have gone out, as well as significant increases in rates.

Tony Payne, vice president of OneBeacon, the largest writer of homeowner policies in the state, agreed.

“We are taking a far closer look than we used to, and so are other companies,” Payne said. “We have to.”

Insurance companies, he said, are in the business of assessing risk, and they seek to minimize the risk when they write a policy insuring a home.

“We are still writing a lot of policies in this state,” he said, “but we have not renewed some policies because the risk is just too high.”

For example, Payne said, if a person has a trampoline in their yard or a skateboard ramp or a dog that has been classified as dangerous, they may not get their policy renewed.

“One of our agents saw a video of a kid with a skateboard on the roof of a garage, jumping off that roof on to a trampoline and into a pool,” he said. “Now I am sure that was great fun, but it’s a huge risk.”

Homes on islands with no fire departments and camps in remote areas of the state that are a distance from any fire department most likely cannot get policies at any price, he said.

Iuppa said he does not have specific figures to compare how much the state’s rates have increased, but he said he has seen several instances of double-digit increases in homeowner rates. He said there were similar increases in 2001.

“We’re hearing from constituents,” O’Neil said. “Some people are telling us they have seen rates more than double.”

The tightening of policy criteria by insurers also is starting to affect buyers. Lenders require that a home buyer have insurance, but state law does not require insurers to provide the ability to buy insurance as they do with health insurance.

That has real estate agents worried that deals could come undone and, in the most extreme case, a lender could foreclose on a homeowner because he does not have the required insurance coverage.

“I have had only one deal fall through in my office because the person could not get coverage,” said Don Plourde, a Waterville real estate broker and president of the Maine Realtors Association. “But, we have been hearing about problems across the state.”

As a result of the problem, Plourde said the group is recommending to its members that they advise buyers to seek insurance coverage immediately after reaching an agreement on a purchase price. Linda Gifford, the group’s legal counsel, said other states are experiencing the same kind of problems.

“The [insurance] industry says this will shake itself out, but I am not so sure,” she said.

Neither is Sen. Arthur Mayo, R-Bath, a member of the Insurance and Financial Services Committee. He submitted legislation, which the panel wants to carry over to the January session for consideration, that would set up what would be an insurer of last resort for homeowners, similar to a high risk pool for auto insurance.

“And we have asked [Iuppa] to look at other possible solutions and report back to us,” he said. “We are going to have to deal with this. I don’t think there is a member of either [the House or Senate] that has not had a complaint from a constituent about this.”

O’Neil agreed. He said he hopes Iuppa can craft some administrative changes that could be implemented before next January to help homeowners with availability and price.

“There is bipartisan concern on the committee,” he said, but because lawmakers have been dealing with other issues, such as health reform, “we just have not been able to deal with this, but we are going to have to.”