NEW YORK – Homeowners can look forward to the smallest increase in homeowners insurance in five years. According to the Insurance Information Institute the cost of insuring homes is expected to rise by only 2.8% in 2004. "Small decreases in the frequency and cost of claims have helped improve insurer financial performance, resulting in a significant moderation in the cost of homeowners insurance in 2004," said I.I.I. Senior Vice President/Chief Economist Robert Hartwig. "With the cost of owning a home in America skyrocketing – sale prices, local property and school taxes, energy costs and, now, interests rates on the rise, the moderation in home insurance costs couldn't come at a better time." The projected increase represents a substantial slowdown from 2003 when homeowners insurance costs rose by an estimated 7.4%. Losses are the most important driver of homeowners insurance premiums. Between 2000 and 2002 alone, homeowners insurers paid out an estimated $13.5 billion more in claims than collected in premiums, rivaling the $15.5 billion in insured losses from Hurricane Andrew-still the most expensive natural disaster in U.S. history in terms of insured losses. By 2003 results had improved substantially, with insurers paying out an estimated $1.03 for every dollar earned. According to I.I.I. although a home remains the most valuable asset most people will ever own, some 64% of all homes in America are underinsured by an average of 27%.