Wayne Tisdale calls the current insurance climate “the perfect storm.”
“In the last 18 months, three huge elements have come together at the same time,” said Tisdale, executive vice president of Stewart Sneed Hewes BancorpSouth Insurance of Gulfport. “From 1986 until 2000, the insurance market was very competitive. In many cases, there was irresponsible underwriting and surplus was lost. In 2001, the stock market had a downturn and then there was 9/11, which took off the top end of the reinsurance market. A fourth factor, determined on a state-by-state basis, is the legal climate. When you have huge judgments, it further takes out capacity and makes underwriting risks greater because insurance companies must judge their exposure to loss. In Mississippi, it’s very high.
“The result of this perfect storm is very high premiums, in some cases, exponential premiums with a greatly reduced capacity.”
And that’s for people who can find coverage.
“We’ve had a lot of calls from people who have been denied insurance and don’t know what to do,” said Shep Montgomery, spokesman for the Mississippi Insurance Department. “It’s becoming a real problem.”
Ron Aldridge, state director of the National Federation of Independent Businesses, said the least insured people are no longer the poor.
“There are so many federal programs available now for the poor, whether it’s the CHIPs program or Medicaid,” said Aldridge. “The most underinsured group is small business people. More people are dropping coverage for their families and taking the risks.”
Premium increases have averaged roughly 35%, said Tisdale.
“And if you can find that, it’s very good,” he said. “Fifty percent isn’t uncommon. Neither is 100%. One property insurance premium on the Coast went from $210,000 to over $580,000 and the deductible went from $25,000 to $150,000. That’s not uncommon.”
Some insurance companies only provide minimal coverage.
“On the Gulf Coast, we deal with windstorm exposure,” said Tisdale. “I’ve got large insureds that have lots of property, say $100 million in total value, that may not be able to purchase but $15 or $20 million in windstorm coverage because nobody will offer more than that. Any more is totally unaffordable.”
As a result, many small businesses are reducing their coverage, taking lesser liability limits and higher deductibles. “That’s all they can do,” Tisdale said.
For two decades, Aldridge has renewed his family’s healthcare plan with the same company. In less than 180 days, he won’t have healthcare coverage because the company is leaving the state.
“For 20 years, I’ve had a very reasonable premium with the same company,” he said. “Looking around, I know my premium is about to double or triple, if I can find a policy.”
The NFIB is working on a plan to pool together enough people to set up affordable plans.
“The administration aspect gets complicated,” he said. “We’ve been working on this concept for several years. Some members of the insurance industry were initially opposed because they thought they’d lose business. Independent insurance agents were concerned and bigger companies knew they risked being locked out if one big company was selected.”
President Bush has pledged support for a nationwide association health plan concept, similar to one that unions have on a national scale, Aldridge said.
“If small business could provide that on the same scale as the WorldComs, we would be able to obtain a benefit package for all small businesses that would be much more affordable and still allow independent insurance agents to retain business,” he said.
In the meantime, small businesses continue to struggle with reinsurance problems. Last year, a group of ophthalmologists paid $32,000 for malpractice insurance. The renewal came in at $77,000, said Tisdale.
“The quote came in at the eleventh hour, as they have in almost every situation lately,” he said. “Then you’ve got to deal with the extended reporting period, or ‘tail,’ which cost 10 times the premium.”
Because of escalating premiums, state insurance commissioner George
Dale said he’s encouraged some doctors “to go naked.”
“But they don’t want to take the risk,” he said.
General contractors and governmental entities are especially having a tough time, said Rex Haynes, president of Brown & Haynes Insurance Inc. in Southaven.
“Take a small contractor, an HVAC guy with five employees, for example,” said Tisdale. “His premium may not be but $5,000 or $6,000, but in terms of exposure, if a guy running wires gets electrocuted or falls off a ladder and injures himself, the claim will far exceed $5,000 so the insurance company won’t have enough premium for the risk. The small guys are the ones that most people are refusing to write. They have to go to the assigned risk pool.”
Larger businesses and government entities are looking at self-insurance or partial self-insurance programs, said Haynes.
“They may self insure the first $25,000 of a claim and have insurance to cover claims above that,” he said. “We’ll see that become more common.”
Three years ago, not many companies were in the assigned risk pool in Mississippi, said Tisdale.
“In the last year, I’ve had to place a number of accounts in the assigned risk pool and I know many other insurance agents are as well,” he said.
To the dismay of home-based professionals, even homeowners coverage has been sometimes difficult to find in North Mississippi, said Haynes.
“There is some concern about getting too much concentration of homeowners insurance in certain areas of the nation, so some companies are limiting their growth in homeowners coverage, especially in DeSoto County, because it’s the only real earthquake zone in the state,” he said. “Several companies have quit writing homeowners at all because they feel they have all the exposure they can handle.”
Contact MBJ contributing writer Lynne W. Jeter at (800) 993-3392 or firstname.lastname@example.org</a.