Availability, affordability critical insurance issues

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Published: April 23,2007

Delicate.

That’s how George Dale, Mississippi’s insurance commissioner, describes the state’s insurance plight.

“I spoke with the State Farm president the other day and tried to get the company back in the state to write more business and his answer was, ‘We feel like the atmosphere is poisoned when there are media outlets and well-intentioned public officials fanning the flames of discontent toward our company,’” he said. “At the same time, he said they continue to revaluate and keep the door open.

“That’s why it’s delicate.”

Bigger than State Farm

Even though State Farm is the most publicized company not writing new homeowner insurance policies in the state, several companies, including Allstate, have declined to cover wind and hail damage in new policies, opting instead to toss that coverage into the Wind Pool. (The Mississippi Windstorm Underwriting Association is the so called insurer of last resort for those unable to obtain coverage elsewhere.)

That’s why Dale compared recent action by state lawmakers to pass Wind Pool legislation reducing rates on new commercial policies by as much as 50% in the state’s six coastal counties “second only to the Toyota package as far as a major economic development bill passed in the 2007 session of the Legislature.”

“A reasonable period after Katrina, we began to see some large suits,” recalled Dale. “I was less than comfortable that we were going to pull out of this as soon as we have. People forget —this was the largest natural disaster in this country’s history and it’s not going to be corrected overnight. The insurance industry, which I regulate, made a lot of mistakes. The federal government, which I don’t regulate, made a lot of mistakes. And the state government that I don’t regulate made a lot of mistakes. Not that their heart wasn’t in the right place. This was just an unprecedented storm.”

The reinsurance market is calling the shots, Dale pointed out. “The insurance industry has absolutely no control over the reinsurance market and can’t exist without it,” he said. “Without reinsurance, most all our insurance companies after Katrina would be broke.”

Feeling a crunch?

Having the Wind Pool in place will simply “buy us time as the market stabilizes,” said Dale, adding that a quiet 2007 hurricane season would certainly help, and that relief would help “Realtors who are having some trouble selling houses in deep South Mississippi.”

Daniel J. Zoble, who manages Hancock Bank’s residential mortgage division, said escalating insurance rates “have been consuming much of an individual’s home-buying capacity,” and priced some potential borrowers out of the market. Hancock Bank’s Chris Roth called the Wind Pool legislation “very important in establishing economic equilibrium, which will speed recovery and growth.”

Mike Boudreaux, president and CEO of Gulf Coast Investment Development, said spiked insurance and construction costs have hampered his company’s ability to sell condominiums recently built on the Mississippi Gulf Coast. “To attract buyers, we’re spending anywhere from 2% to 4% of the gross selling price on marketing, where before it was maybe a half-percent,” he said. “Investors are looking, but it’s at a much slower pace than before.”

Marty Milstead, executive director of the Mississippi Home Builders Association, said insurance availability and cost has been “the single most deterring factor in rebuilding the residential side along the coast.”

Chris Wilson, president of the Mississippi Association of Realtors, and broker/owner of First Choice, PLLC, in Laurel, said he hasn’t had a deal “crumble over an insurance premium” even though “there have been a couple with trouble finding a carrier.”

Wilson said real estate professionals, who are “cautiously optimistic” about the insurance market improving in Mississippi counties just north of the six coastal counties included in the Wind Pool, are lobbying hard for the creation of a federal disaster insurance program. “These disasters are so gigantic that taxpayers will be paying ultimately and there ought to be a systematic way to approach it.”

Dick Munton Jr, president of Prime Mortgage Inc. in Hattiesburg, said that, surprisingly, insurance affordability and availability “hasn’t had a tremendously negative effect” on the Pine Belt’s residential market.
“It’s created some problems we’ve been able to overcome,” said Munton, whose business is up 25% across the board over last year. “Hattiesburg has been an oasis in the housing market.”

Nancy Lane, broker/owner of Nancy Lane Commercial Real Estate in Jackson and past president of the Mississippi Commercial Association of Realtors, said GO Zone benefits have boosted commercial sales in Central Mississippi, offsetting insurance concerns. “I’ve heard from some brokers of residential sales that as they get closer to closing, sometimes the insurance is way above what the buyer anticipated,” she added.

Dale said few other insurance matters of significance in Mississippi outweigh the ever-present availability and affordability issues. “Once you get past those two, everything else is small by comparison,” he said.

Contact MBJ contributing writer Lynne W. Jeter at Lynne.Jeter@gmail.com.

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