In a June 19 letter to State Sen. Trip Pittman and Rep. Joe Faust, Gov. Robert Bentley created the Coastal Insurance Work Group, which will be tasked with finding solutions to the high wind and homeowners insurance premiums imposed upon many of the state’s coastal residents annually. The work group is composed of 17 members, all but four of whom live in Mobile or Baldwin counties.
Along with Pittman and Faust, the work group includes State Sen. Bill Hightower, Alabama Center for Insurance Information and Research Director Dr. Lars Powell, insurance industry representative Steve Simpkins, Gov. Bentley spokesperson Suzanna Willis, Alabama Department of Insurance Deputy Commissioner Charles Angell, Fairhope City Councilman Jack Burrell, attorney Beth Lyons, Rev. Jerry Bergman and Hurricane Homeowners Insurance Initiative (HHII) representatives Michelle Kurtz, Dan Hanson, Earl Janssen, Jerry Doughty, A.C. Leggett, Cathy Odom and Charles Kettell.
Bentley asked the group to deliver recommendations by Dec. 31 focusing on policy, guidelines, possible multi-state framework and the next steps to promote justifiable homeowner and commercial property insurance in the state’s coastal counties.
The group’s creation is in response to a March 18 meeting when HHII members, Mobile and Baldwin county legislators, representatives from the Baldwin County Commission and city representatives met with Gov. Robert Bentley’s staff and the Department of Insurance to stress the need for a plan for “fair property insurance premiums, deductibles and availability” in Alabama.
HHII helped craft the Property Insurance Clarity Act of 2012, which requires insurance companies authorized to do business in the state to report the number of policies they write in each ZIP code, along with premiums collected and losses incurred. The first year of data, analyzed by HHII’s Earl Janssen, showed homeowners in coastal counties claimed an average of $585 in damages per year, compared to $703 in annual claims upstate. It also indicated that while Baldwin and Mobile homeowners consistently claimed less in damages each year, they paid, on average, about $500 more per policy annually over the last 10 years.
In contrast to previous committees and groups charged by the governor’s office to recommend similar solutions, Kettell said this is the first time a coastal homeowners insurance work group has comprised a majority of coastal residents.
Kurtz was among those advocating for a new work group after the previous groups failed to recommend solutions beyond home mitigation and catastrophic savings accounts, neither of which addresses the inequality of the Clarity Act’s data. Bentley’s letter instructs the group to avoid discussions of hazard mitigation and public education.
“Mitigation is wonderful and needs to be done, but if your budget is already tight you don’t have money for it,” she said.
Kurtz said previous groups like the Affordable Homeowners Insurance Commission only met once per month. Bentley’s letter put Pittman in charge of setting the first meeting, but HHII hopes the group will meet for the first time Aug. 3 and 4, followed by a pair of six-hour meetings each week until December. Ahead of those meetings, HHII and others in the group will discuss the definitions of risk and insurance, with the goal of reaching consensus on background.
HHII’s Dan Hanson said the group will seek solutions that may include two options. The first option is a multi-state coastal insurance band, which would comprise coastal areas from Maine to Mexico, including cities as far as 70 miles inland.
A second solution is to use the data collected from the Clarity Act to get the costs of losses spread more evenly statewide. Hanson said one way to do that is for the state to pass a law requiring premiums to be the same price for the same house value statewide, and if a company sells homeowners insurance in one part of the state, it must also sell the same policy in coastal counties.
“If our losses are no higher than the rest of the state, then our premiums shouldn’t be higher,” Hanson said. “If the state is paying $950, then our premiums in coastal counties should be in the same area. The two big ideas are multi-state and ‘equality’ laws, then each one has multiple ideas within. I hope we work on multi-state first, because we believe it has potential.
Conversations about ‘equality’ regulations will likely be more contentious.”
Kettell, a Spanish Fort resident and HHII volunteer, said the coastal band model would not require participation from all coastal states. He said if just three or four other states were on board, it would work.
Kettell also said the state needs to look at the three classifications of insurance companies. The first two include companies located in Alabama and companies, like Allstate and State Farm, which are regulated by the Alabama Department of Insurance. A third classification, non-admitted companies, are not regulated by the state. Non-admitted companies pay higher state sales taxes, but may leave consumers at a greater risk of having claims unpaid if the company becomes insolvent, Kettell said.
Clarity Act data does not include information from non-admitted companies because they are not regulated by the Department of Insurance. HHII estimates approximately 20 percent to 30 percent of Mobile and Baldwin homeowners use non-admitted companies for coverage.
“A lot of the mainline companies have dropped or limited coverages in Mobile and Baldwin counties and the non-admitted companies came in to fill that void,” Kettell said.
Kurtz said high homeowners insurance premiums and deductibles are costing coastal residents far more than just extra cash on their mortgage each month. She said her deductible is $7,000 and she has paid $16,000 more than the state average in premiums over the last few years.
“That’s my son’s college money,” Kurtz said. “Everybody has their story about where they have to sacrifice to pay these premiums, but for some people it can mean bankruptcy or their house note. It is unjust. We need the governor and the Department of Insurance to stand in the gap and raise Cain.”
“I think we have a very good balance of people who want to fix the problem,” Hanson said of the group. “The insurance people who are on it, I have total respect for. I think the group is made up of intellectually honest and capable people.
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