Companies offering wind policies but paying for it can be expensive

by

Published: June 25,2007

Recently, a Coast newspaper ran a news article regarding an issue of great concern: the lack of availability of wind coverage from private insurance companies. The day after the newspaper article said that no insurance companies were writing new wind policies, Beacon Insurance Services Inc. ran an advertisement: “Now writing commercial property, homeowners, mobile home & builder’s risk with Wind Included, A-Rated companies, great service, call for a quote today.”

Louie Langlinais, president of Beacon Insurance Services Inc., said he didn’t really consider it news that wind coverage is available. He also said his company isn’t the only one on the Coast offering the policies.

“There are other agents writing wind coverage, as well, through the same carriers,” said Langlinais, who was inundated with calls after putting in the ad.

Some of the carriers that provide the insurance are Lloyds of London and Lexington Insurance Company. The commercial insurance policies covering wind and fire are available for reinforced concrete steel buildings such as the Seabreeze Condominiums.

“That kind of construction is wind resistive,” Langlinais said. “That is a big difference.”

Coverage is available from Lexington Insurance Companies for homes of more than $300,000 in value. While the premiums may be lower than going into the Mississippi Windstorm Underwriting Association, or Wind Pool, an insurer of last resort for homes and businesses, the policy has a 5% deductible. Langlinais said that program was in place before the storm, and hasn’t changed.

“Lexington Insurance Companies has an A-rated program,” Langlinais said. “We wanted folks to know we had access to that program.”

Making a comeback

Langlinais believes the insurance market will come back on the Coast.

“It always does,” he said. “Look at Camille 37 years ago. You couldn’t get an insurance company in here. But it is slowly going to come back. We are about a year out from seeing some real business. But we don’t know what State Farm is going to do. We don’t know what Allstate is going to do. Those are the big boys.”

He was recently able to write a commercial wind policy in Harrison County south of Interstate 10 for a 7.5% deductible. That is indication wind coverage is coming back. But Langlinais said he thinks insurance companies are charging too much.

Mark Edward Strickland, principal, Integrity Insurance Providers Inc., Vancleave, is another Coast insurance agent who is writing some wind insurance.

“There is wind, but it comes at a high price,” Strickland said. “For instance, the building I’m in, I wrote it. But it comes with a 10% wind deductible. Let’s put that in perspective. This is a $300,000 building. That is a $30,000 deductible. But that is better than going into the state Wind Pool. The building’s owner saved money on her total premium by taking the insurance I sold her rather than going through the Wind Pool.”

But that building was north of 1-10, and that makes a difference. The farther north, the better it is. Strickland recently sold a commercial wind policy in George County with only a 2% deductible.

Finding wind coverage for residences is more difficult. Strickland said it can be found, but may be even more expensive than the Wind Pool. For example, he found a quote of $3,500 in premiums for coverage of a $150,000 dwelling in Bay St. Louis, but it had a 5% deductible.

“You could have gotten a better rate going through Wind Pool,” Strickland said. “So coverage may be available. You can find it if you really look hard. But it is no bargain. It is higher than actually going through the Wind Pool.”

Strickland said he feels insurance companies need to start writing wind policies on the Coast.

“To be honest, I’m mad about it,” Strickland said. “I don’t see anyone really stepping up to the plate out there, and they don’t have to. Keep in mind there is no government agency that says they have to. Furthermore, as they are pushing people into the Wind Pool, they are inflating the rate of their other wind excluded policies, fire and liability and homeowner’s policy. There is no reason for that. The risk is gone. It has been pushed off on the state. If we have good fire protection in our communities, then we should have better rates because the main peril that we face has been pushed off on the state. If I was an insurance company, I would sell a reasonable fire policy down here because there is low risk compared to the risk of wind.”

Why take the risk?

Mississippi represents less than 1% of the total U.S. insurance market. “Why would you take a risk here on wind?” Strickland asks. “But there is no excuse for not writing fire and homeowner’s policies. If you are pushing off wind on the state, why not write an affordable fire and homeowner’s policy on Coast?”

Strickland sympathizes with people who thought they were covered for flood and didn’t realize they needed a separate policy. He likes Rep. Gene Taylor’s idea for an all-perils policy. But he fears that proposed legislation won’t pass because of opposition from people in other parts of the country who don’t face catastrophic losses.

The insurance issue is complicated. For example, State Farm Insurance was sued for breach of contract recently by State Attorney General Jim Hood. Hood claimed State Farm had reneged on a settlement agreement in January to re-evaluate claims. State Farm has stated it has stopped writing new coverage in Mississippi because of actions like the Hood lawsuit.

“Fear of litigation could be one of the reasons insurers aren’t writing more policies,” Strickland said. “People who didn’t have flood insurance are suing to get paid anyway. If the insurance companies are made to pay for perils that weren’t covered, maybe that is what the fear is. I guess that is a real fear given Jim Hood’s lawsuit against State Farm.”

State Farm says it is no longer writing new property insurance anywhere in the state because of the supercharged political environment.

“It was a difficult decision that we had to make, but we did it in order to safeguard our situation for all of our policyholders,” said Jonathan Freed, national spokesman for State Farm. “It was just becoming too volatile down there. But State Farm is continuing to write auto coverage, and we are continuing to serve our existing property customers. We have grown our business in Mississippi in the wake of Katrina. We haven’t pulled out of Mississippi.”

Freed said the attorney general lawsuit against State Farm regarding allegations of not settling claims fairly has made it even less likely the insurance giant will start writing new property policies in the state anytime soon.

“We are deeply disappointed that the attorney general is more interested in election year headlines than he is in really trying to help the people of Mississippi,” Freed said.

A spokesman for another of the largest carriers in the state, Nationwide Insurance, said it isn’t possible to know when wind insurance might be available again on the three coastal counties.

“We are writing new homeowner’s policies in Mississippi, but in Hancock, Harrison and Jackson counties, we are not writing wind,” said Eric Hardgrove, spokesman for Nationwide Insurance. “We are writing new policies with wind in Pearl River, Stone and George counties. We are continuing to evaluate our business strategy, obviously, to maintain long-term stability to serve customers in Mississippi and across the country. Right now we are not in a position where we can speculate on future business strategies.”

Another of the largest providers in the state, Allstate, has continued wind coverage for existing customers in the six southernmost counties who had both property insurance and auto coverage. Also, Allstate announced recently the existing customers with homeowner’s insurance can be considered for wind and hail coverage if they build homes that meet stronger building codes.

“We just announced in late April new rates and incentives,” said Allstate spokeswoman Kate Hollcraft. “One of the incentives we announced was that Mississippi customers who build to stronger codes and have their property inspected will have the option to purchase wind and hail coverage. Stronger building codes are something that is being talked about a lot in coastal areas. We wanted to step up and say we support stronger codes and, to show that, we wanted to offer an incentive to our customers. If our customers build their homes according to stronger building codes and show through an inspection it can handle hurricane winds, they can get wind and hail coverage through Allstate.”

Hollcraft said customers throughout the state may want to consider higher deductibles as a way to keep insurance premiums more affordable. A survey has shown 60% of Allstate customers in the state had no deductibles on their policy.

“The deducible is very pertinent to the wind discussion because people are looking to find good coverage and coverage that they can afford,” Hollcraft said.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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