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Cut loose by Allstate, homeowners likely to find coverage elsewhere

With hurricane season’s official start less than a month away, 5,000 Mississippi homeowners face the prospect of losing their Allstate home insurance coverage.

But state polices adopted after Katrina in 2005 should go a long way toward ensuring the homeowners can find policies elsewhere, say Professor Larry Cox of the University of Mississippi and Matt Wulf of the Reinsurance Association of America, or RAA.

“Mississippi has done well in this area,” said Wulf, vice president of state relations and assistant general counsel to the RAA.

The state, he said, has been effective in managing rate structures and trying to keep private insurance investment in the six coastal counties.

Specifically, the state has kept the climate conducive to keeping insurers here, said Cox, holder of the Robertson Chair of Insurance at the University of Mississippi.

“I do think they have done a good job as far as law post-Katrina,” Cox said, especially in helping to ensure that private insurance companies can recoup losses through higher rates if another Katrina-type disaster struck.

Early on, Cox said, it looked as if insurers “would be abandoning the market like crazy,” but the adjustments to state rate-making policy gave them assurance they could recoup any future losses.

For some Allstate customers, the best chance of keeping their coverage may be parked in their driveways.

Allstate received the go-ahead last month from Insurance Commissioner Mike Chaney to raise rates 19.4 percent and to jettison 5,000 homeowner policies. But before it cuts homeowners loose, it will give them an opportunity to stay insured by adding Allstate auto insurance, says Allison Hatcher, Allstate spokeswoman in Nashville, Tenn.

The doubling up also makes the policyholder eligible for a discount of 25 percent on the homeowner policy, up from the current 15 percent, she said. Additional premium reductions can come with increased deductibles, Hatcher noted.

Chaney issued the approval in early April after a September rejection of a request for a 44 percent increase and permission to drop 18,000 policyholders. In its filing, Allstate said it actually needed a 75.8 percent increase but would settle for the 44 percent.

“The commissioner really did have some heartburn over the original filings,” said Mark Haire, Mississippi’s deputy insurance commissioner.

Of the 5,000 policyholders subject to cancellation, about 150 are in the six-county coastal region – Harrison, Hancock, Jackson, Pear River, Stone and George. None of those can be cancelled during hurricane season, according to Haire.

Allstate has promised to give the other homeowners targeted for cancellation at least 60 days’ notice.

The ones in the Gulf counties have the option of the Mississippi Windstorm Underwriting Association, a state created pool whose above-market-rates reflect its role as an insurer-of-last-resort for coastal residents.

“We’re not selling a Cadillac policy,” said Joe Shumaker, president of the Windstorm Underwriting Association Pool.  “What we’re selling is fire and wind and hail – no theft. No liability. We’re not a homeowner’s policy. Basic coverage needed for a mortgage – that’s what we’re offering.”

To collect from the windstorm pool, he said, “Your home needs to either burn down or blow down.”

Homeowners elsewhere in Mississippi cut loose by Allstate should be able to find coverage, provided the dwellings are structurally sound, not situated in remote locations and the owners do not have a history of claims, Shumaker said. “There are markets out there.”

State Farm, for instance. Company spokesman David Majors said State Farm is looking to increase its policies in the state by 2 percent. State Farm, a mutual company owned by policyholders, is willing to write homeowner anywhere in Mississippi except the half-dozen coastal counties. The company already insures about $8 billion in property on the Mississippi Coast, Majors said.

It will, however, provide renters in insurance in the six counties, he noted.

Homeowners who lose their Allstate coverage would have to meet State Farm criteria before gaining a policy form the company. “Our criteria right now is just like any other state,” Majors said, citing the type of home, type of construction, the dwelling’s age and the owner’s claims history.

State Farm is the leading homeowner policy writer in the state, with 236,000 dwellings insured. This includes homeowners, renter, mobile home and condominium community polices, according to Majors.

Meanwhile, Professor Cox of Ole Miss said he expects property insurers in Mississippi will be seeking rate increases on a regular basis for a while to come, essentially because of the state insurance commissioner’s insistence that rates be set statewide and not directed at specific regions of the state.

“I think the coastal windstorm exposure is the huge antelope we will all have to swallow,” he said.

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