For South Mississippi’s business community, affordable, reliable property insurance remains our greatest challenge. Business owners need insurance that is available, reliable and reasonably priced. Insurance is a basic building block of economic development and growth. Removing this from the local economy is equal to an economy without banks, mortgage companies and builders.
Along the Gulf Coast’s three counties —Hancock, Harrison, and Jackson, the residential real estate market demonstrates the ripple effect this insurance crisis is having in our economy and recovery.
One large coastal real estate firm recently informed my office that the number of residential contracts that fall through at closing has dramatically risen. Before Katrina, the number was less than 10 percent. Today, that number has more than tripled to nearly 1/3 of all contracts. The reason? The cost of homeowner’s insurance.
When the bank includes the exorbitant insurance premiums into the debt-ratio equation for the mortgage loan, an increasing number of prospective buyers no longer qualify for the loan. This is so prevalent that coastal Realtors are advising potential buyers to shop for insurance before they begin to look for a home.
Commercial insurance rates have also soared for small business owners. In 2007, the Hancock County Chamber of Commerce reported that its members had seen an average increase in premiums of 346 percent with the range between 300 to nearly 670 percent.
These skyrocketing premium increases came on the heels of insurance companies deliberately failing to pay business owners on legitimate claims for damage to their buildings, contents and loss of business income.
South Mississippi business owners who thought they had purchased all the available insurance found that their insurance companies left them twisting in the wind in Katrina’s aftermath. Like their residential counterparts, business owners were blindsided by a small, unknown clause buried in their multi-page insurance contracts: the anti-concurrent causation clause.
United States Navy storm modeling tells us that we had up to 150 mile an hour winds for as much as four hours before the storm surge ever arrived on the Mississippi Gulf Coast. If after those four hours a single 2×4 was left standing where your home or business was and then the storm surge knocked it down, your insurance company considered that a concurrent causation and ruled that since both events happened concurrently, they were not liable to pay on your homeowners policy.
Many South Mississippi businesses and homeowners were forced to hire lawyers and engineers to take their insurance carriers to court. Claims that should have been paid in a matter of days or weeks were not paid for years.
When disaster hits, businesses need to know that the insurance that they had purchased will provide them with the funding to reopen their doors quickly.
Putting our business owners through this ordeal is not fair, and passage of the Multiple Peril Insurance Act I have reintroduced will make it unnecessary.
The Multiple Peril Insurance Act amends the National Flood Insurance Program to permit property owners an option to purchase wind coverage along with their flood insurance. One premium, one policy, one adjuster and one claims check for both wind and flood damage.
Under the rules of the House of Representatives, the legislation will be done in a way that pays for itself, thus any argument that it would be taxpayer-subsidized is eliminated. The Congressional Budget Office has already concluded that the wind coverage policy would pay for itself.
The Multiple Peril Insurance Act of 2009 will deliver what South Mississippi’s business community needs most: available, affordable and reliable property insurance.
U.S. Rep. Gene Taylor (D) Bay St. Louis, contributed this Op-Ed column for the Mississippi Business Journal. For a public official or newsmaker to contribute an Op-Ed column, contact MBJ Managing Editor Ross Reily at email@example.com.
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