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Coast insurance: slow during best times, nearly stops for storms

When there’s a hurricane in the Gulf of Mexico, which has happened all too often this summer, things slow down considerably at Coast insurance offices.

“It shuts you down,” Dena Graham, an agent with the Insurance Barn in Gulfport, said recently when Hurricane Ike was in the Gulf of Mexico. “Right now we can’t write. Today we are doing spring cleaning. Once a storm gets in the Gulf, we can’t write any policies. That is true not just for homeowner’s and business insurance, but even comprehensive auto. You can do liability of uninsured motorist on vehicles, but you can’t do any comprehensive auto, or any wind and hail. Of course, there is a 30-day wait on flood insurance. It is just extremely slow.”

Prior to a major storm developing, insurance offices normally see a spike in people coming in to purchase policies. Some wait too long and then are disappointed when told they can’t purchase.

“When I explain you can’t write it, they are a little upset,” Graham said. “Normally what happens is everyone wants to buy a policy when the storm is out there. Right before a storm, you will sell, sell, sell. But after the storm enters the Gulf, it is extremely slow.”

Things haven’t been exactly going gangbusters even before the hurricanes started coming with regularity. Insurance rates are expensive, and there isn’t much competition between companies to sell policies because companies want to limit their exposure in such a disaster prone area.

Insurance companies have zones with A being on the water south of the railroad track, B zone between the railroad tracks and Interstate 10, and C and D zones above that.

“The problem with that is no one wants to write policies south of the railroad tracks,” Graham said. “A and B is going to totally shut everyone down because the rates are so high. I really do believe it is really impacting all the commercial businesses. They want businesses to come back to the Coast, but those A and B zones have higher rates, and there are companies that will not write them at all. Even if businesses want to come back, they can’t because they can’t get insurance.”

Graham lives in Zone A and has purchased insurance through the state’s Wind Pool program.

“You can get insurance but it is at a way higher rate,” she said. “It is just part of living on the Coast. I was hoping to see some changes making insurance a little more affordable, but that hasn’t happened. A lot of people are self-insuring because they can’t afford the rates. They are just taking the chance. That is extremely scary and I pray for every one of them. Nobody can really afford to pay some of these prices, but you have to say, ‘What is more important?’”

During Hurricane Katrina, shipping containers from the State Port at Gulfport broke lose and turned into battering rams damaging nearby neighborhoods. Graham said she was glad to see in Gustav that the port was completely evacuated.

“The port did a fabulous job of evacuating,” Graham said. “They cleaned it out totally. That has been a major concern for people who live near the port. We were very proud of them.”

Graham said, though, there was a surprising amount of debris from Gustav on the beaches.

“They are going to be cleaning them for a long time,” she said.

Graham doesn’t see the insurance situation on the Coast improving anytime soon. What she would really like to see is more companies coming in to give people a bigger choice.

“I don’t see any breaks coming our way until we get some competition in here,” she said. “I don’t see anything coming soon to help the situation. I wish I did. I really do.”

Mark Strickland, principal, Integrity Insurance Providers, Vancleave, said real estate agents are telling him the high cost of insurance has absolutely killed the real estate market on the Coast. Yearly insurance for a $150,000 home averages about $4,500 per year.

“That is a substantial monthly addition to their mortgage if they escrow,” Strickland said. “That is almost $400 per month extra on their house note. It has really hurt the real estate market. It hurts the insurance business, too, because not as many people are buying policies. It has depressed the market.”

He has seen some improvement but it has been in the more expensive homes, $350,000 and higher. As long as the homes meet a few guidelines regarding when they were built and distance from the water, you can find insurance for them without restoring to the Wind Pool.

“But as far as the ‘Average Joe’ home, $150,000 to $200,000, there has been no relief,” he said. “You can find the insurance, but it isn’t very affordable. The wind rates are high and the homeowners’ policy rates, which includes fire, are elevated even though they exclude wind coverage.”

Strickland has seen a significant number of people rushing in at the last minute to buy wind insurance before the storms enter the Gulf. They had a lot of phone calls and people coming in to purchase wind insurance prior to Hurricane Gustav.

It is because storms are so unpredictable that insurance companies stop writing policies anywhere along the Gulf Coast once a hurricane enters the Gulf. Strickland said one day it may look like a hurricane is headed to Texas, and the next day everything changes.

“Insurance companies are scared to death so they shut down writing new business,” Strickland said. “I see the problem with people here not having affordable coverage, but if we continue to have storms and active hurricane seasons, I don’t see any relief in sight.”

He doesn’t think a federal fix like a proposed all-perils policy provided by the federal government is going to happen. He doesn’t consider it fair to ask people in the middle part of the country to subsidize the high-risk coastal areas.

And insurance companies must have rates that are actuarily sound. There has to be enough money collected on premiums to pay claims and still have profits left over for shareholders.

“The federal government just wrote off $17 billion that the federal flood program owed after Katrina,” Strickland said. “The government paid out $17 billion more in claims than the money they took in with the flood insurance premiums. The rates are not actuarily sound. If we come in with a federal solution, it will be more of the same. We will all pay in more income taxes or people who live in harm’s way will pay for it. I love it here. This is home. But there is really no easy solution to the insurance problem.”

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.

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