I’ve had the pleasure of chatting with Sup offline and the last email he sent me deserved a guest post on its own. Never let it be said we leave out a point of view. Our offer to Mr. Chaney to join former Louisiana Insurance Commissioner Jim Brown authoring guest post here stands as well. – sop
It is my desire to provide readers of “Slabbed” an unemotional and, hopefully, logical perspective from the industry viewpoint. I recognize the MS Gulf Coast is so different from other coastal areas. In fact, I work on the SC Coast and that is a different world. The MS Coast has always been “blue collar” and the gaming industry must be considered a “blue collar” industry for the great majority of workers. Therein is where the dilemma is.
If you allow me I will try to give you some insight as to how the industry looks at the situation. My first management position was in Underwriting in the early 1970’s. Part of our responsibility was MS and LA. We spent most of our time concerned with the LA coast as at that point the MS Gulf Coast was still trying to recover from Camille. LA was happening because of the oil business. My company began growing like crazy in coastal LA and we had a “worst nightmare” scenario. It was exactly the track Katrina took and we were right over thirty years ago.
At that time insurance companies did not have all the models to monitor exposure. It was a gamble. The industry became greedy and asleep at the wheel form 1969 until 1992 when Andrew hit. At the same time the industry converted the Homeowner policy to a maintenance contract as a competitive tool. It gave away too much coverage, at no charge. If you will recall the USA really had about 20+ years of no major event years. This was the first wake up call and “catastrophe management” entered the insurance dictionary. All of sudden the HO policy was no longer profitable for the industry.
So the industry ends up with too much exposure at inadequate rates. Human nature is what it is. The consumer does not understand they had an under priced product for too many years. This is understandable because the great majority of policyholders have no claims. The basic premise of the product is that many pay for the losses of a few.
Then we had the “prosperity” of the 1990’s and into today. Coastal areas exploded with population and high value homes. A classic example is Gulf Shores. One could take their family there before Frederick. A family could rent a three bedroom home on stilts on the beach for about $600 a week. Then Frederick hits and it changed the whole personality of that area. The values exploded with the growth. This change overwhelmed the insurance industry. Quite frankly, the industry tried to ignore this until the four hurricanes in FL in 2004 and Katrina and Rita in 2005.
Another issue affecting MS is it has one of the lowest profit margins for Auto in the USA. That fact impacts Homeowner availability and cost. Being a small premium volume state also has an effect.
This is where reality set in and the industry had to make very difficult decisions to survive. It did and the resulting pricing changes forced many “locals” from their homes. This is where we are now. What I have stated does not resolve any of challenges you all face. I just wanted to try and give some background from an industry standpoint where we are now. I wish the situation was different, but it is not. Having lived in the great state of MS for 25 gives me sense of being a native. I know what great folks live there.