Coastal insurance reform

The average cost to insure a home in Mobile and Baldwin Counties is eleventy billion dollars, if you can find an insurer.  Central and North Alabama are facing the same types of issues in the wake of the recent devastating tornadoes, so this is about more than ‘coastal insurance reform’.  Insurance reform may get addressed in a special session of the legislature, if not, it will certainly be a top issue in the next legislative session.

Governor Dr. Robert Bentley just named the members of the Affordable Homeowners Insurance Commission, led by Baldwin County Probate Judge Tim Russell (R).  Huntsville is represented on the commission by Wayne Parker and State Farm agent Joe Demos.  Some interesting appointments include K. Carl Smith (The conservativeMessenger) and Michelle Kurtz (Homeowners’ Hurricane Insurance Initiative).  State Senator Ben Brooks (R – Mobile), State Representative Mike Hill (R – Columbiana), and State Representative Steve McMillan (R – Gulf Shores) are on the commission – presumably to sponsor legislation incorporating the results of the Commission’s efforts.

I spoke with Representative McMillan last week after his fishing trip and he said that insurance reform was his top legislative priority.  The GOP legislature passed a couple of bills this year to ”create a tax deduction for strengthening homes against hurricanes and tornadoes, set up an Insurance Department trust fund for retrofitting homes, and require that insurers publicly disclose information when they ask regulators for rate changes.”

From Jeff Amy at The Mobile Press-Register:

The commission was originally intended to address just the troubled insurance market in coastal Alabama. Bentley expanded it to a statewide focus following the April tornadoes, which sparked fears of rising rates and diminished insurance choices, both of which have plagued the coast since 2004’s Hurricane Ivan.

“The lack of affordable insurance is an important issue that many in Alabama face. After the devastating tornadoes of April, insurance reform needs to be examined now more than ever,” Bentley said in a statement. “I want this new commission to work together to stop the rising cost of insurance for the benefit of all Alabamians.”

…”I’m looking to get bills on paper that we can vote on in a special session,” said state Sen Ben Brooks, R-Mobile. Brooks has successfully passed several bills, and has others that he hopes to make law.

Brooks said he expected a special session in October or November, which implies three or four months for the commission to complete its work.

More from Jeff Amy at the MPR:

Baldwin County Probate Judge Tim Russell is expected to lead the commission… who led Foley-based Baldwin Mutual Insurance Co. for more than three decades…

The tornadoes, estimated to have caused more than $3 billion worth of insured damage, have set off fears that rates could rise and coverage could become less available in the rest of Alabama in the same way that the market has deteriorated in Mobile and Baldwin counties since Hurricane Ivan struck in 2004.

The Alabama Insurance Underwriting Association may be the model for a state-wide program:

The purpose of the AIUA is to provide a market wherein owners of eligible property located in coastal areas of Baldwin and Mobile counties may obtain essential insurance when they are unable to obtain coverage in the private insurance market.
 
By design, AIUA policies provide basic, no frills, coverage at rates that are generally higher than the average rates offered in the private market for a policy providing broad coverage options. Typically, a property owner will seek an AIUA policy as a “last resort” because they have been unable to find better coverage at lower rates elsewhere.

4 thoughts on “Coastal insurance reform

  1. High risk must necessarily equal high insurance costs. Is there any reason to think this is anything more than a move by folks with high risk property to get other folks to pay for their insurance?

    • Tom – I’m not interested in helping someone pay for insurance on their Ono Island beach house or beach rental property. Coastal insurance is a long standing problem for our South Alabama neighbors, so I am interested in the Commission’s efforts.

      A companion issue to the insurance problem is building codes. If I read it right, the AIUA won’t underwrite houses older than 20 – 25 years unless renovated. Even newer houses must meet stricter standards (thus mitigating some of the risk).

      • Besides risk and cost, what exactly is the issue in south Alabama? I would think the good people In Baldwin and Mobile Counties are perfectly capable of writing their own building codes. And folks do not have to buy any building unless satisfied with it in all respects. I appreciate you airing the issue and am eager to learn more. In the meantime, I will keep a hand on my wallet and tighten the grip.

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