A group of Baldwin County residents is pushing coastal legislators to create a Coastal Insurance Working Group tasked with developing a plan to deliver solutions to comparatively high homeowners insurance rates coastal residents have paid since 2006.

The Homeowners Hurricane Insurance Initiative (HHII) was a major proponent of the Property Insurance Clarity Act of 2012, which required 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 bill was retroactive 10 years and included information from hurricanes Ivan and Katrina. According to data collected from the Clarity Act and analyzed by HHII’s Earl Janssen, homeowners in Baldwin and Mobile counties claimed an average of $585 in damages per year, compared to $703 in annual claims upstate.

The data also shows that since 2006, Baldwin County is consistently ranked in the bottom 10 in damage claims statewide. While Baldwin and Mobile homeowners consistently claimed less damages each year, they paid on average about $500 more per policy annually over the last 10 years.

Following the passage of the Clarity Act and the release of its findings one year later, the Alabama Department of Insurance issued a report challenging the results.

The DOI’s “Challenges with Drawing Conclusions from The Clarity Act Data,” released March 17, 2014, said that data from the Clarity Act did not consider other expenses like the total cost of doing business. The report states that insurance companies have to take into account claims adjusting expenses, commissions to agents, internal overhead expense, premium tax and reinsurance.

The report also says that losses are more volatile and unpredictable on the coast from year to year than upstate losses, so the cost of capital must be greater on the coast in order to attract companies willing to invest in writing insurance there.

According to the report, insurers use hurricane and tornado computer models instead of historical data to set rates. The models indicate coastal counties are more susceptible to wind losses than upstate counties, even considering tornado losses. The report also states that as a result of the models, reinsurers charge insurers more in coastal counties than the rest of the state.

Further, the DOI emphasized the Clarity Act data included hurricane losses from 2004 and 2005 that can be expected every 15-25 years, while a tornado outbreak like the one in April 2011 would only occur once every 250 years. Thus, comparing data from typical hurricanes with data from a rare tornado outbreak is misleading, according to the DOI.

Last Thursday Michelle Kurtz, a Daphne resident and staff member at Ecumenical Ministries in Fairhope, said her homeowners insurance premiums had risen from $1,200 to $2,400 to $3,200 annually during a six-year period after hurricanes Katrina and Ivan.

“We pushed the Clarity Law so that we had ground to stand on,” Kurtz said. “Now we have evidence that something is wrong. That’s all it is, evidence. The DOI is building a huge case against the data by saying it is faulty and that you can’t use it for rate making. We didn’t want to use it for rate making anyway. We just want to know, ‘do we deserve this?’ That’s the question.”

On March 18, 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 DOI to stress the need for a working group to develop a plan for what HHII calls “fair property insurance premiums, deductibles and availability” in the state.

HHII spokesman Dan Hanson said Tuesday the proposed working group would be made up of 19 members, 15 of whom live in Mobile and Baldwin counties. Of those, six hold elected office in Mobile or Baldwin counties, eight are current or former business owners and all have spent time studying the Clarity Law. The group also has four spots reserved for members of Gov. Bentley’s staff and representatives from the DOI.

The group would be asked to deliver solutions to the governor within 120 days of its formation and would be charged with finding ways to reduce premiums and provide a mechanism for calculating insurance premiums in the future.

One thing the group might consider, Hanson said, is creating a multi-state coastal insurance district that would establish its own catastrophic wind reinsurance. He also said a parity bill, where all homeowners policies would provide coverage for all risks with no more than 50 percent difference between the highest and lowest policy, would be considered.

“I think the key ingredient to this group will be that these are people who have studied the issue extensively,” Hanson said.

HHII hopes, with the blessing of Bentley and coastal legislators, the group could be formed in the next few weeks.

Janssen said Thursday the proposed working group would not be charged with making others in the state pay more for homeowners insurance, only that all counties be treated the same way in writing those policies. Janssen, a Foley resident, was one of the original organizers who created the faith-based HHII.  

“We are a Christian organization,” Janssen said Thursday. “As Christians, we look out for our fellow man. That’s our prime concern. We don’t want to cause insurance companies to overcharge upstate people. We do not wish the insurance premiums to go up on anyone, we’d like them all to go down. We can’t control how much the insurance companies charge. All we can do is try to control the policy they use to make their rates.”

Hanson said three previous state-level commissions had been formed, but none proposed specific solutions to the problem. He said the Affordable Homeowners Insurance Commission (AHIC) had more than 30 people with only one self-described consumer advocate in Kurtz.

AHIC, which was tasked in 2011 with studying home insurance affordability and availability in Alabama’s coastal counties, brought two solutions to the table, one of which was pushing risk mitigation for homeowners.

“If there are ways to make your house stronger and better prepared for a hurricane, that’s all well and good,” Hanson said. “But that doesn’t solve the injustice situation. Our losses are lower than the rest of the state, or about the rest of the state, so it is unjust to charge widows $3,000 more than you charge similar widows in Huntsville or Gadsden.”