You can’t get much farther away from the Gulf of Mexico and still be in Mississippi than you can in Corinth.
And, now, nearly 18 months after Hurricane Katrina surged ashore in the southernmost reaches of the state, ripples from that storm are being felt in Corinth and other distant locales.
“We’re seeing rates going up,” declared Rick Miller, owner of Miller Insurance Agency in Corinth. “Companies are getting very restrictive about what they’ll write.”
One of his main underwriting companies, “very receptive to almost any homeowner insurance last year,” has decided not to renew its existing policies and is not writing anymore.
“It’s affecting my business, creating problems for us,” Miller said. He’s had to find other carriers in order to retain his customer base; the alternative rates are invariably higher.v
And Miller is in a bit of a quandary about whether reluctant insurers and rising rates are the result of Katrina or those companies’ desire to, well, just raise rates.
“It’s very aggravating and frustrating to have to do this every year or two,” Miller complained. “I’m constantly having to re-sell the business.”
Homeowners, Miller pointed out, are seeing their old $500-$700 annual premiums escalate to $900-$1,000 per year with new companies: “It’s not unusual to see a 30% to 40% increase.”
Insurance Commissioner George Dale has heard it all before, and he is still listening. Speaking to an early morning gathering recently in Tupelo, Dale said that he is in the unenviable position of trying to keep property insurance rates as low as possible while still maintaining profitability for insurance companies.
And Dale knows where the blame lies for that job becoming even more of a minefield than usual.
“Katrina was awful,” he said to the audience of 50 or so businessmen and politicos gathered in the Food Court of The Mall at Barnes Crossing. Many in attendance munched croissants supplied by a regional real estate firm.
“Katrina,” Dale continued, “affects all of us and it will for some time.
“It absolutely engulfed the insurance industry.”
Dale launched into an explanation of the Mississippi Windstorm Underwriting Association, a consortium of property insurers commonly called the “Wind Pool.” The Wind Pool is the entity that provides wind-and-hail insurance to homes and businesses in the state’s six coastal counties.
According to Dale, the Wind Pool was funded with about $40 million before Katrina; post-Katrina, an overwhelming number of claims drained the pool. Rate increases of more than 300% were forecast to make up the deficit.
Dale said Gov. Haley Barbour was able to cobble together some federal funding amounting to about $30 million to stymie the threatened increase and the state legislature seems poised to infuse another $150 million into it.
Even so, property insurance premiums south of Interstate 10, the magic line dividing areas of extreme hurricane-destruction risk south of it from the less risky areas north of it, are going up. Homeowners face a 90% increase in premiums for the windstorm coverage while businesses are looking at increases of 268%.
Re-insurers, Dale said, are the driving force. Those financial companies insure the insurance companies and they want to reduce the amount of risk in hurricane-prone coastal regions. He added that he doesn’t see much stabilization in the insurance industry coming before the end of 2007, after the market “seeks its own level.”
Apparently, according to Doug King, re-insurers are prompting insurance companies to look at risk-reduction in areas not related to hurricanes.
“Some companies are unwilling to write earthquake insurance, new or renewals,” said King, personal lines manager for M&F Insurance Group Inc. From his Kosciusko office, King oversees nine agencies in Central and North Mississippi.
While the risk from earthquakes in the northern part of the state might be a debatable point, King said not writing the policies is a reduction in exposure for insurance companies.
King said the windstorm risk is likely going to cost his customers more, if they file claims, since the trend is toward a variable deductible based on the value of the house.
A $100,000 house on the Coast carries a 5% deductible, or $5,000 (regardless of deductible level) that must be paid out of pocket before insurance kicks in.
“As you go farther north,” said King, “it drops to 2%.” Some companies, he noted, have initiated that variable deductible while some haven’t.
“It’s a mixed bag out there,” King said.