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Tuesday, September 04, 2007
Home insurance woes mount in coastal states
By John Gramlich, Stateline.org Staff Writer
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Two years after Hurricane Katrina, state governments along the Gulf Coast and in other storm-prone areas of the country are facing a fundamental problem—how to keep homeowners insurance available and affordable in places deemed riskier all the time.
Private insurers are raising rates or pulling out completely in areas where costly seaside development continues and where, according to forecasters, powerful storms are likely to hit again and cause huge property losses.
Under pressure from residents who can no longer find affordable homeowners insurance—or any homeowners insurance—states are scrambling to fill the void left by the private firms. In some cases, they are taking on more of the insurance burden themselves and, in other cases, courting insurers with tax breaks and other incentives in an attempt to expand access and drive prices down.
But a popular solution has yet to emerge.
The Gulf Coast, still nowhere near recovery after Katrina left more than $40 billion in insurance claims in its wake, remains the center of attention. The governors of Alabama, Louisiana and Mississippi met with insurance executives last Sunday (Aug. 26) in Biloxi, Miss., to discuss the coverage crisis and call attention to the scope of the problem.
Alabama Gov. Bob Riley (R) said at the meeting that he “can’t get insurance” for homeowners along the state’s 53-mile coastline; Louisiana Gov. Kathleen Blanco (D) urged the insurers to meet with her immediately to find ways to provide more policies in the Bayou State. But the governors at the summit did not agree on any formal policy initiatives, reflecting a lack of consensus on how states can address the problem even as lawmakers try a variety of approaches.
Louisiana has offered financial incentives to insurers willing to do business in the state, including grants of up to $10 million. South Carolina has offered tax credits to insurance firms, and the state is extending tax breaks to residents if they agree to strengthen their homes against storm damage to attract insurers.
Meanwhile, coastal states as far north as Maryland and Rhode Island—where hurricanes are less common but still a threat—recently have set up task forces to study insurance availability and affordability. The densely populated Northeast Corridor is becoming a growing concern for insurers, according to industry representatives, who claim that hurricanes there would cause even bigger losses.
Under Gov. Charlie Crist (R), Florida—where 80 percent of property lies in coastal areas—has fought more aggressively than any other state to resolve its insurance problems, rolling out a series of changes aimed at reducing rates for homeowners. But many of the changes have proven divisive, including an expansion of the state-run “insurer of last resort,” Citizens Property Insurance Corp., to cover 1.3 million residents—more than are covered by any private firm in the state. Critics argue that the state is taking on far too much financial risk without enough in its coffers to deal with the aftermath of another storm of Katrina’s magnitude.
Insurers, for their part, contend that homeowners policy rates are based on risk and that state efforts to lower those rates encourage development in vulnerable areas without regard to the dangers.
Many state lawmakers across the country agree with that assessment, said Candace Thorson, deputy executive director of the National Conference of Insurance Legislators, a group of lawmakers who share information about public policies on insurance. But Thorson said recent state action has been driven by angry residents who cannot afford insurance anymore and are demanding help from lawmakers.
“It’s pretty hard when your constituents are banging on your door and saying their homeowners rates have doubled. That’s a tough spot to be in as a legislator,” she said.
Florida, which held a special session just after Crist took office in January to address its insurance crisis, has led calls for regional or national catastrophe funds that insure insurers and which supporters say would help bring premiums down. But the idea has been slow to catch on regionally and at the national level because states with far fewer risks are reluctant to pay for reconstruction in the Sunshine State or other states where hurricanes are relatively common. Officials in Florida and other coastal areas counter that catastrophe funds would cover other disasters including tornados and earthquakes that can affect states nationwide.
The White House has rejected a national fund, claiming that the federal government should not be the insurer of last resort and that states are largely responsible for their own problems because they regulate private insurance firms.
Even an initiative that has received support from lawmakers, insurance firms and residents alike—stricter building codes to make homes more resilient to storms and attract lower insurance rates—faces obstacles because homebuilders generally oppose such action, according to Florida Senate Minority Leader Steven Geller (D), who has spoken out frequently on the insurance shortage. Florida has the toughest building code in the nation, a policy Geller said he considers vital to preventing damage and lowering rates.
“If all the buildings in New Orleans were built under our building code, it would have reduced two-thirds of the damage” during Katrina, Geller said.
Related stories:
States urge hurricane awareness
Comment on this story in the space below by registering with Stateline.org, or e-mail your feedback to our Letters to the editor section at letters@stateline.org. Contact John Gramlich at jgramlich@stateline.org.
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Coastal Insurance Availability
By William Cumming on Sep 13, 2007 1:20:14 PM
The General Accountability Office (formerly the General Accounting Office) recently released a report indicating that the insurance "industry" takes up to 2/3 of premium income from the National Flood Insurance Program (NFIP). That program will make or break on coastal issues. Since the first policy was issued in June 1969, most of the policies have been issued in coastal counties. In-land, riverine floods, for which the program was designed should be left to the states to do whatever. For coastal areas, the Federal Government should become a reinsurer only but for all comers not just the private insurance "industry." And the Federal government should condition the reinsurance on the adoption of state coastal construction standards that cannot be waived unless the reinsurance coverage would be voided ab initio. The enforcement mechanism should be left to the states and of course their dependent governmental organizations ofter called counties, cities, towns, or special districts. Smart states would limit governmental entities in coastal areas. The states are now collecting state premium taxes on the NFIP and this should be totally devoted not to general revenues but flood plain management and enforcement of the adopted state coastal standards. There should no longer be any disaster relief for structures in coastal areas that are privately held. This would be replaced soley by the private or public (state)coastal coverages for physical damage reinsured by the Federal Government. No more game playing on what is flood, coastal surge, wind, hurricane damage etc. The coverage should be for any physical damage. State and local structures should be insured also assuming they are not functionally dependent on a coast location, for example, harbors and docks. These would not be insured by by exclusion self-insured.
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Homeowners Insurance?
By Eileen Graham on Sep 4, 2007 3:16:43 PM
What exactly has Charlie Crist done other than make promises?
I was dropped by Allstate this year and what insurance I could find costs more than one month's income.
Crist also promised that he'd do something about property taxes. My recent notice from Brevard County noted that the tax collector isn't bound by any laws except his own. I guess Mr. Crist was unaware of that.
Thanks for all your "help" Governor Crist.
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The seventh annual Hal Hovey Award was presented Feb. 3 to Marc Perrusquia, an enterprise and investigative reporter for The Commercial Appeal, the daily newspaper in Memphis Tenn. The award is made jointly by Stateline.org, which is part of the Pew Center on the States, and Governing Magazine for outstanding coverage of state and local government. | |
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 | Stateline.org has put together a list of state public policy resources organized by issue. Here, you will find useful links to essential information from government, academia, and think tanks. If you have a link to add, please email us.
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By William Cumming on Sep 13, 2007 1:20:14 PM
The General Accountability Office (formerly the General Accounting Office) recently released a report indicating that the insurance "industry" takes up to 2/3 of premium income from the National Flood Insurance Program (NFIP). That program will make or break on coastal issues. Since the first policy was issued in June 1969, most of the policies have been issued in coastal counties. In-land, riverine floods, for which the program was designed should be left to the states to do whatever. For coastal areas, the Federal Government should become a reinsurer only but for all comers not just the private insurance "industry." And the Federal government should condition the reinsurance on the adoption of state coastal construction standards that cannot be waived unless the reinsurance coverage would be voided ab initio. The enforcement mechanism should be left to the states and of course their dependent governmental organizations ofter called counties, cities, towns, or special districts. Smart states would limit governmental entities in coastal areas. The states are now collecting state premium taxes on the NFIP and this should be totally devoted not to general revenues but flood plain management and enforcement of the adopted state coastal standards. There should no longer be any disaster relief for structures in coastal areas that are privately held. This would be replaced soley by the private or public (state)coastal coverages for physical damage reinsured by the Federal Government. No more game playing on what is flood, coastal surge, wind, hurricane damage etc. The coverage should be for any physical damage. State and local structures should be insured also assuming they are not functionally dependent on a coast location, for example, harbors and docks. These would not be insured by by exclusion self-insured.
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Homeowners Insurance?
By Eileen Graham on Sep 4, 2007 3:16:43 PM
What exactly has Charlie Crist done other than make promises?
I was dropped by Allstate this year and what insurance I could find costs more than one month's income.
Crist also promised that he'd do something about property taxes. My recent notice from Brevard County noted that the tax collector isn't bound by any laws except his own. I guess Mr. Crist was unaware of that.
Thanks for all your "help" Governor Crist.
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