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Affordability, availability, exclusions and confusion affecting residential and commercial policyholders

Solutions elusive as many struggle with expensive insurance

Insurance issues continue to be a thorn in the side of the Coast’s recovery. The problems of affordability, availability, exclusions and confusion are affecting residential and commercial policyholders. For three years, carriers have dropped coverage and policyholders and raised rates, making it difficult for home and business owners to plan.

State Insurance Commissioner Mike Chaney says the issues boil down to those of being able to buy coverage when it’s needed and being able to get a valid claim paid.

“We still have issues of predictability and stability in the market place,” he said. “We want to maintain competitive insurance in the state. Without available, affordable coverage, it will take 12 to 20 years to rebuild the Coast.”

A key issue is the steep rise in the rates of wind coverage for coastal homes and businesses. With insurance companies excluding that coverage, a large number of property owners have been forced into the State Wind Pool, the insurer of last resort. A Wind Pool bill passed by the Legislature gave some relief but rates still increased by 92%.

Dave Treutel, a Bay St. Louis insurance agent and member of the State Wind Pool Commission, lauds the bill for modernizing and revamping the program. “We can now get more deductible options and had some rate reduction,” he said. “It’s not cheap, but it’s cheaper than it was last year.”

Rates vary according to a home’s location, size and amount of coverage. There are five wind zones with zone A being the area closest to the water. For instance, a $200,000 home in zone A in Pass Christian would pay a premium of $2,980 per year in the Wind Pool in addition to $700 for homeowner’s coverage and $200 for flood. Or about $350 per month added to the mortgage and taxes. That’s on $200,000 worth of coverage on the house and $50,000 on contents.

“On June 18 the commission adopted a plan of operations (a 20-page document) that allows the Wind Pool to offer incentives to companies to include wind coverage on the Coast,” Treutel said. “That’s a tool the Legislature gave us. We had only six companies writing it here. If we can get more to come in and write, that is the way out of our demise.”

Making strides

He notes that insurance companies pulled out after Hurricane Camille, too, but new ones came in. “The commercial market has responded better than the residential market,” he said. “We are making strides with that and I’m optimistic.”

Chaney says the Wind Pool bill stabilized insurance rates all over the state. Treutel says the program will not go away. Several more solutions have been suggested but nothing else has been adopted at this time. Every state has something comparable to the Wind Pool.

The most promising solution for Coast wind policyholders is the all-perils insurance legislation introduced by Congressman Gene Taylor to include windstorm coverage in the National Flood Insurance Program. On the private side, national insurance carrier Nationwide lobbied Congress in 2008 to package wind and flood into one product, according to a report released by the Gulf Coast Business Council Research Foundation. The report says other private insurers are proposing interstate coastal risk pools for wind.

Treutel, a member of the Business Council, says Taylor recently got an optimistic call from Sen. Chris Dodd, chairman of the Senate Insurance Committee. “The flood policy will continue to be subsidized but the wind coverage will be paid according to actuary costs,” he said. “Gene believes it will give us lower rates, but we don’t know that yet.”

Chaney states that State Farm Insurance is not renewing policies within 1,000 feet of the water’s edge and is excluding wind coverage from homeowner policies within 2,500 feet beginning November 1.

“Other companies may follow suit in eliminating wind coverage, raising rates or dropping customers,” he said. “That will put more people into the Wind Pool. Without insurance, people can’t finance a project or build a home unless they’re rich.”

Treutel says the advisory flood maps produced last year by FEMA are still being negotiated by Coast municipalities with some challenging the flood heights. In rapidly growing coastal areas, some flood maps had not been updated since 1983.

“Some maps coming out say buildings have to be at 20 feet, and the communities are arguing about that,” he said. “Each will have no choice but to adopt it so residents can get loans and insurance. The minute cities adopt it, the new heights go into effect. That’s why they’re taking their time.”

Right direction?

Although there are many issues still to be resolved, Treutel sees some positive things happening. Among those are the International Building Code adopted by five coastal counties.

“The state had the opportunity to adopt it and did not; that’s a negative,” he said. “Keep in mind we had damage in many counties and adopting the code would be a plus for insurance companies locating here. Building according to this code would make it possible to offer rate reductions.”

Chaney, too, sees some positive results. There are grants available for retro-fitting houses to the higher code. There are also 39 new companies doing business in the state with more being signed.

“The Coast is still a profitable business for insurance companies,” he said. “The lower three counties all have decent fire ratings. They have no hail storms and few tornadoes. Our goal is to make sure companies stay there and write coverage. We’re also working to reduce fire deaths and trying to keep healthcare insurance stabilized although we do not have a lot of leverage over that.”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.

About Lynn Lofton

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