You don't have to be able to read the tea leaves in order to decipher what's on your insurance horizon for 2002: higher premiums and less coverage.

This double whammy had already been predicted to a lesser degree by insurance industry experts prior to the Sept. 11 terrorist attacks, which brought a volatile close to the third quarter of 2001. After posting a $3 billion net loss after taxes through the first nine months of 2001 — its first-ever net loss after taxes through three business quarters — the United States property/casualty industry hurtled toward its first-ever annual loss.

In 2002 you'll likely see a modest increase for auto and home insurance and a double-digit increase for health insurance. The only bright spot will be outstanding deals in term life insurance, at least for the near future.

Beyond the events of Sept. 11, other factors contributed to the insurance industry's overall gloomy economic forecast. They include:

• Poor returns on investments. Property/casualty insurers took a 5.7 percent decline in net investment income to $27.5 billion through the first nine months of 2001 from $29.2 billion in 2000.

• Increased car-repair costs. The cost of body work is rising nearly three times faster than it was in 1999 and is still accelerating, according to the Insurance Information Institute (III).

• Skyrocketing medical and vehicular jury awards. The average jury award in vehicular liability cases is up 81 percent since 1994, says the III. Jury awards for medical malpractice claims jumped 76 percent from 1996 to 1999, according to Jury Verdict Research.

• Rapidly rising costs of mold claims. In Texas, for example, Farmers Insurance Group projects a five-fold increase in its residential claims for mold damage in 2001, costing the company about $85 million.

• Runaway health care costs. Particularly worrisome is the 22 percent increase in the price of prescription drugs.

These costs, coupled with the estimated $30 billion to $70 billion in losses stemming from Sept. 11, make insurance rate hikes inescapable for 2002. According to III's "Earlybird Forecast for 2002," a panel of Wall Street analysts have forecasted an increase in net written premiums of 15.1 percent for property/casualty lines in 2002, resulting from a combination of increased prices and higher demand. If realized, the analysts say the industry will grow at its fastest pace since 1986 — as long as there are no more surprises of the magnitude of Sept. 11.

Modest increases for auto and home insurance

In 2002, insurance premiums will rise about 6 percent nationally for houses and cars, according to the III. "Individual homes and cars are not terrorist targets," says Robert Hartwig, the III's chief economist. "Increases are really unrelated to Sept. 11. Rates were flat for most of the 1990s. Now they are generally going up, but should mean a relatively modest $30 for the average homeowner and $50 per vehicle."

However, there are exceptions to these modest increases, particularly in New Jersey, where a "take all comers" auto insurance law means that auto insurers cannot turn down high-risk applicants unless they have more than nine points on their motor vehicle records. In New Jersey, several insurers have requested — and received — permission to raise premiums anywhere from 6 to 8 percent and move high-risk drivers into restructured rating tiers where they may see their premiums increase as much as 30 percent.

Double-digit hike for health insurance

The events of Sept. 11 affected health insurers much less than the powerful combination of a weak economy and double-digit increases in health care costs. As a result, "businesses will likely cut back on benefits and increase employee contributions," says John Ascencio, spokesperson for Andersen, a national accounting firm.

Nationwide, reports have indicated that private employers are facing health insurance premium increases of 13 percent to 50 percent in 2002. In fact, more than 80 percent of employers are considering raising employee contributions for health insurance premiums, or have already done so, according to a recent survey by the National Business Coalition on Health. The survey also reveals that at least three-fourths of the 100 employers surveyed said they are considering increasing their employees' co-payments.

Some states and residents have been particularly hard hit. In New Mexico, for example, health insurance premiums have more than doubled for some older residents. According to Michael Batte, an actuary for the New Mexico Department of Insurance, the premiums in 2001 for some traditional fee-for-service health plans have risen between 30 and 40 percent, and as much as 50 percent for some managed care plans — and rates are expected to continue to reflect increased health care and pharmacy costs in 2002.

Life insurance: Good deals

While premiums for most kinds of insurance have been rising, term life insurance prices have been steadily declining since 1996 thanks to an extremely competitive market, according to LIMRA International, a financial services trade association. "This is the best of all times to buy term life insurance," says LIMRA President Richard Wecker. "I would say we're definitely reaching the bottom of the market."

Insure.com, an insurance-comparison Web site, recently polled the 90 life insurance companies that sell policies through its site and found that term life insurance prices for females dropped an average of 7.8 percent in 2001, while premiums for males dropped an average of 6 percent.