Rebecca Mowbray reported Louisiana homeowners insurance is nation’s third-most-expensive, study says in Sunday’s Times Picayune.
Louisiana remains the third most expensive homeowners insurance market in the nation behind Florida and Texas, according to newly released data from the National Association of Insurance Commissioners.
Mississippi ranked seventh. Expanding the NAIC data with median family income during the reporting period shows Mississippi and Louisiana in last and next-to-last place on a ranked listing of states when state median household income is considered.
Mowbray points out policyholders actually pay more because the numbers do not reflect the cost of flood insurance, which is sold as separate policy.
According to a story in the Sunday Sun Herald, Chaney: Funds will help stabilize pool premiums, a growing number of homeowners in Mississippi’s three coastal counties have the additional expense of coverage from the state’s so-called wind pool:
After Hurricane Katrina devastated parts of the coast in 2005, the number of pool policyholders rose from about 16,000 to about 42,000.
In a related story, Insurance commissioner Mike Chaney says adding $19M into wind pool could stabilize insurance rates, Rep. Brandon Jones, D-Pascagoula, vice chairman of the House Insurance Committee, told the Mississippi Press the subsidies into the wind pool are holding down costs.
“There are fewer companies writing insurance policies along the coast and more people are turning to the wind pool for insurance coverage,” he said…
Jones said the coast needs private insurance companies to compete for the business on the coast.
“Unfortunately, that is not the case right now,” he said.
Represenative Jones’ statement begs the question will it ever be the case. Coast realtor and wind pool board member Mark Cumbest told the Mississippi Press the lack of affordable insurance has a huge impact on the full recovery of the six coastal counties….
Cumbest said the wind pool reinsurance committee members will meet with reinsurers in London and Bermuda in early 2010. After those meetings, the wind pool board recommends rates to Chaney, who sets the premium rates, he said.
Policyholders can reduce their premium rates up to 30 percent by taking advantage of credits given for strengthening their structures, said Cumbest. The credits were implemented in July, he said.
In Low tide, rising rates sink all ships published November 30, 2009, SLABBED quoted a February MID release on the mitigation study and reference the impact those discounts had on rates in Florida, the state with the nation’s most expensive homeowner premiums according to the NAIC data:
The study is expected to have many benefits. For one, it would give leaders a clear cost-to-benefit analysis. As important, the wind mitigation study would allow for systematic improvements in the hurricane resistance of buildings in the six counties on the Mississippi Gulf Coast (Hancock, Harrison, Jackson, Stone, Pearl River and George) by utilizing wind-resistant construction techniques to reduce property damage and/or loss.
This would result in a significant reduction in insurance premiums, as well as reduce the negative economic impact of a hurricane on the entire state and its citizens, the MID said.
SLABBED reported the trend this past September:
Insurers, led by State Farm Florida, are complaining that the discounts for installing shutters and other protections have become so popular that they are undercutting the industry’s bottom line. Last year, citing the cost of the discounts, State Farm asked for a 47.1 percent rate increase.
Robert Hartwig, naturally, had the spin: “There is no other place on the planet with such a high concentration of risk,” said economist Robert Hartwig, president of the industry-backed Insurance Information Institute.
There is also no place in the nation with a population less able to withstand higher premiums than Mississippi with the nation’s lowest median household income.
These numbers don’t tell the whole story for Mississippi Coast residents. And depending on insured value X-Wind is slightly cheaper than the all perils average but then you must throw in $2-3K for the windpool and another $.4-3K for flood plus add local property taxes and you get to $500++ a month in escrow payments alone. It prices homeownership out of reach for somewhere around 30-40% of the populace unless there are other taxpayer subsidies in play and as we found out with REACH even then free money isn’t enough to foster wider homeownership.
So after 4 years, the GOP leadership of this state and that of the gulf coast are still scratching their heads saying, “there are no easy solutions.” There aren’t in fact, especially if you accept the status quo as the starting point for finding solutions.
As it stands, the regulation, pricing and availability of insurance is a state issue and a state issue alone. At what point will the voters of this state hold their elected officials accountable for this disaster, one that our elected leadership has done nothing to solve save throwing taxpayer money around to limited result?
So Sup, Lynda what is the alternative? If Barbour, Bryant and Chaney weren’t using direct taxpayer subsidies to buy reinsurance for the windpool, the State budget would suffering worse than it already is and there would be labor shortages at the industrial complex in Jackson County and across the coast. Mississippi doesn’t have a wealthy population base to make it’s coastal counties the exclusive province of the wealthy and our neighbors to the west no longer have the money to insure a second home in Mississippi after paying their insurance on their main homes in Louisiana.
sop
Definitely a state issue, Sop!
I wonder how many realize the coast has been the engine driving the state economy or understand how that sluggish post-Katrina “engine” factors into the deficit/budget cuts that will reduce state services in every county in the state.
Among the reasons I find state-funded insurance, particularly our wind pool, objectionable is that they mask the total market failure of private insurance, perpetuate the myth that expanding the NFIP to a multi-peril policy isn’t a nation-wide necessity, and redirect state funds away from the historic role of states to provide certain basic services to protect pubic health and safety.
The argument that the NFIP is over extended falls short when one considers how much of what it covers is the result of poorly designed/maintained flood control projects of the Corps of Engineers.
In that regard, the GAO report that’s needed is one that segregates the cost of those man-made disasters from the cost of flood from natural disasters. If those costs were charged to the DOD/USACE budget, the NFIP would be more than solvent.
What we have now is disaster roulette – a pick-a-peril approach to property coverage with one policy for fire, etc.; another for flooding; and a third for wind that undermines the bread-basket housing and construction industries.
One other point, the disparity between the cost of auto and homeowner coverage.
Good question, SOP. Unfortunately, as high as our premiums are, it is STILL very difficult for insurance companies to make a profit on dwelling insurance in Mississippi (whether written on Homeowners forms or Dwelling Fire forms) even when we don’t have hurricanes. As you might expect, fire losses account for a significant portion of our claims.
Maybe, in his role as Chief Fire Marshall, Cheney could take a look at that side of the equation. What is the frequency rate for fire losses in Mississippi and how do we compare to other states? What about TOTAL fire losses. How does the number of TOTAL fire losses in Mississippi compare to the rest of the country? We don’t know the answers to these questions. We COULD know because fire departments are required to file reports with the Fire Marshall. But, as best we can tell, the Fire Marshall’s office does nothing with those reports except “file” them. It is SUPPOSED to compile the information contained in those reports and make it available for review but, that does not happen. I know. I tried to get the info.
Comm. Cheney needs to study this issue, see if our fire losses are out of proportion and, if so…do something about it. Possible solutions include: more fire stations, more and/or better fire fighting equipment, more/better training of fier fighters, improved water supplies, improved building codes, the list goes on.
Another thing that impacts the rate we pay is the Windpool. In years past, “politics” kept the windpool for operating in a fiscally sound manner. Rates were kept artificially low. There was no intent to earn a profit or even generate a decent reserve of funds, thereby limiting the amount of money available to pay claims or buy adequate reinsurance for events like Katrina. Furthermore, the pool had no idea what an “adequate” amount might be since they had never properly modeled their exposures.
This was all presumed (by some) to be “OK” because, if the pool ended up without enough money to pay their losses, they’d just assess all the standard insurance companies for their proportionate share of the shortfall (based on the amount of premium they write statewide). Then, along came Katrina. The windpool was wiped out. I think I remember that the amount of funds available from the pool, including reinsurance, was something like $90-$100 million while paid losses totaled $30 billion or so. Whatever the actual numbers, the shortfall that had to be covered by insurance companies was a staggering amount. Many, many times more than what they owed in damages to their own policyholders. And, they never received one dime of direct premium to cover these losses. So now, these losses (justifiably) get factored in to future rates. Hopefully, the NEW windpool model will work better than the old one but, until it is tested and proven, companies will be wary.
Another – and probably the MOST important thing we need to do is EDUCATE our citizens about how insurance is supposed to work!
Insurance companies don’t “print” or “manufacture” the money they use to pay claims. They collect a little money from YOU and a little from ME, and a little from someone else, add it all together and then just hold on to it for the time when one of us incurs a significant loss due to some “agreed-upon-type” of event. When that event happens, they use the money they collected from US to pay for it. In other words, when people talk about insurance companies having “deep pockets”, those pockets are OURS – YOURS and MINE!
When insurance companies set their rates, they are simply making educated GUESSES as to how much money they will need to collect from us in order to have enough to pay for those “agreed-upon” losses (not ANY or ALL losses), actual administrative costs of issuing the policy and investigating/paying our claims, and provide for a little bit (usually no more than 8-10%) of profit for themselves. IF they guess right, they make their profit. If they guess WRONG, they STILL have to pay our claims -EVEN THOUGH we didn’t ante up enough -and so, they go in the hole. They incur a loss instead of a profit. Since insurance companies are in business to make a profit (otherwise, they’d have no reason to exist), they MUST recoup those losses – as quickly as possible – by increasing rates enough to cover expected future lossess AND to make up the shortfall for having underestimated past losses.
Also, I realize that there are many, many people on the coast still unable to rebuild. But, very, very, VERY few of them have legitimate complaints against their insurers. When a claim is made, the insurance company’s job is not to JUST PAY THE CLAIM. They must FIRST investigate to make sure the loss was actually caused by one of those “agreed-upon” events and that the amount of damage claimed is reasonable. To do anything else would be to breech their fiduciary responsibility to US. (Remember, they are just managing OUR money!)
The people on the coast can’t rebuild because (a) they didn’t buy the type of coverage they needed (ie: flood) because they didn’t want to spend money on an insurance policy they really didn’t think they’d ever need or (b) they REFUSED to purchase adequate limits, insisting that they did not NEED the “ridiculous” amount of coverage suggested by the insurance company & that they could “rebuild all day long” for $xxx,xxx. Well, turns out…they DID need flood insurance and they COULDN’T rebuild for $xxx,xxx. So, they got mad at their insurance company (got to be mad at somebody, right?) and sued them to try to force them to provide the very same coverage they said they didn’t want, didn’t need and DIDN’T PAY FOR!
When an insurance company is forced to pay damages that are not of the “agreed-upon-in-advance” type, our ante falls short and the insurance company has to cover our shortfall. THEN, we have to ante up EVEN MORE each subsequent policy year until the insurance company has recouped its loss and is back on track to make a profit. Even when they (WE) ultimately prevail in court, the insurance company incurs significant court costs (increased admin costs) trying to protect OUR MONEY. These costs ultimately make their way back to us as rate increases.
If everyone was simply responsible enough to UNDERSTAND the insurance mechanism, READ their policies, ASK QUESTIONS if they don’t understand & BUY THE RIGHT coverage, the mechanism would work. Rates would stabilize and affordable coverage would be available to everyone, everywhere.
Bottom line…there is a lot that CAN be done to help reduce the rates we pay for insurance in Mississippi. But, NOTHING will change as long as people expect ALL the remedy to come from the insurance companies. After all, they don’t HAVE to do business in Mississippi. They WANT to do business here – but ONLY IF they can make a profit. In order for our rates to change, WE have to change.
And while we are on this subject, it’s not just our PROPERTY insurance rates that are among the highest in the country. Just check out our auto insurance rates. That, too can be fixed. But WE have to do the fixing….NOT the insurance companies.
What a great response – so much “common ground” and room for discussion! The “fire” issue is something I’ve been interested in for some time. It backs into the larger issue of population shifts; accessible, affordable housing; transportation and employment.
In other words, reducing/preventing house fires is a challenge but an economic imperative for the state as well as insurers.
I’m curious about the windpool. We covered Association Casualty Ins. Co., et. al. v. Allstate Ins. Co., et. al. – and the way the windpool assesses carriers hardly seems fair or even logical. I gather that bothers me more than insurers.
The only subject you’ve touched on that I disagree with is why there was lack of coverage on the Coast but I’m going to let Sop respond first on that point.
Thank you for taking the time to write such a thoughtful, informative comment.
I see Lynda has been listening to Robert Hartwig too much and not reading enough Slabbed.
Lynda people that had flood insurance were still blanket denied on their wind claims, and those that tried to exercise the full rights under their contracts like the Henry and June Kuehn had to litigate tooth and nail to simply have State Farm honor their appraisal provision. Nationwide concocted bogus burden of proof arguments to support their blanket denials which our Supreme Court shot down 3 years after the fact. Notice I didn’t use the term “INVESTIGATE” or “ADJUST” because most of the time there was no adjustment beyond the blanket denial. All the major retail insurers are guilty. And forcing such litigation rather than honoring the all perils policy is the fault of insurers not the insureds, many of which were advised “they did not need flood insurance” by their agents. I know that for a fact because less than one year before Katrina I too recieved such “sage” advice which I ignored.
The fact is the insurers were over exposed and the fault for that lies with them, not their innocent victims. And blaming the victims for following the advice of their agents or for the bogus claims decisions isn’t new to us, insurance types typically mindlessly spout the party line without much critical though or attention to established facts.
What we experienced is part of a larger problem, one which I became personally familar in 2004 when Nationwide tried to put the screws to my elderly Mother after one of their insured ran a stop sign. The way I see things her large legal judgement obtained 3 years later isn’t her fault, rather it was Nationwide that tried to save a few bucks on what would have been a $12K claim. (and if she hadn’t had a son to buy her a car after the accident she would have been forced to walk those three interveneing years.) I figure for every person like my Mom there are around 99 that would have taken 50 cents on the dollar out of desperation.
Isn’t this the new way of adjusting claims…..the McKinsey way where claims adjusting was transformed into a profit center and policyholders that dared to exercise all their rights under their policies were treated to “boxing gloves” instead of good hands?
You are right the solution will never come from the perpetrators/insurers. Left to their own devices your industry has adopted the mafia business model on the retail end. I hope you excuse me if I don’t blame the homeless policyholders that remain homeless because State Farm, Nationwide, USAA, Allstate, etc wouldn’t honor their policies.
There may be some common ground but the overall divide is gargantuan.
sop
Sop, it is clear that you and I will never agree on this subject. I spend 8 -10 hours every day in the insurance business so I know of what I speak.
I know, literally HUNDREDS of people who make their living in this business. I know NOT ONE who would knowingly or willingly treat a claimant unfairly.
I know HUNDREDS of people, on a personal basis, who have had occasion to file claims for damage or injury. I know NOT ONE who has felt compelled to sue their own insurance company because they believed themselves unfairly treated.
As for Nationwide and your mother, their first duty was to THEIR CUSTOMER. Their contract with him promises not only to defend him against claims of negligence but ALSO to act appropriately with regard to your mother so that any subsequent judgement against him would not be INCREASED beyond actual damages by their actions. That tells me that, for whatever reason, Nationwide has serious reservations about WHO was negligent and to what degree and/or the actual value or the damage or injury claimed. It would not have been in Nationwide’s best interest to deny or delay payments unless they believed they were justified in doing so…and they KNOW that. It is unfortunate that it took 3 years to settle your mother’s claim but, when lawsuits and lawyers get involved, it takes that long. After all, that’s how THOSE guys make THEIR money….the longer it takes, the more they make. (By the way, “if you are entitled” to a rental car, a trained monkey can get you one “the same day”. You don’t need Richard Swartz!)
As for the handful of people you mentioned who encountered problems with their Katrina claims, first of all…..they have little to do with the question regarding why insurance rates in Mississippi are so high….which is the issue I was addressing. However, since you brought them up… I have followed these cases and, regardless of your willingness to believe their motivation and regardless of any court’s decision to ignore the legal contract that existed between these insurers and these customers, these companies provided policies that contain an EXCLUSION for the events (all of them, regardless of which came first) that caused these losses (ie: the Concurrent Causation Exclusion). This exclusion is not unusual. It has been around for decades. It doesn’t matter whether you LIKE that fact of its existance, it was there and it IS a legitimate, reasonable exclusion. An, in most other states, the policy language would be upheld by the court. But you just never know what the court in Mississippi is going to do…… And that’s one more reason insurance companies aren’t rushing to do business in here. They can’t trust the courts here to enforce their contracts. If you can’t be sure what kinds of claims you are going to have to pay, how can you possibly estimate the amount you need to charge for the coverage????)
Furthermore, Nationwide, Allstate, State Farm are known to be CHEAPER than Safeco, MetLife, Travelers, etc. You know why???? Because they provide a slightly lower level of coverage! For example, the concurrent causation exclusion. It all goes back to the point I made earlier. When you buy an insurance policy, you are buying coverage for “agreed upon events”. When these people bought their Nationwide and State Farm policies, they CHOSE the level of coverage when they CHOSE the cheapest policy they could find. They COULD HAVE HAD a policy that did not include the concurrent causation clause…but they’d have had to pay a little more (like maybe $50) for it. And they could have KNOWN about the coverage differences if (a) they had asked for a coverage comparison instead of just asking the price or (b) they could have READ their policies! Then they’d have known! Just like everything else….you get what you pay for (unless you are a homeowner in Mississippi. Here, you buy the cheapest, stripped down policy you can find, then you go to court and sue to get the coverage you didn’t WANT to pay for. ) And, if they had purchased adequate flood insurance coverage, they wouldn’t never have had an issue about whether their Nationwide policy had a concurrent causation exclusion. If the house is GONE, the flood policy would have paid (assuming sufficient limits). There would been no attempt to figure out whether wind or water came first. Wouldn’t have mattered. So, the very fact that these people HAD to go back to Nationwide to try to find some coverage is PROOF that they didn’t have flood insurance…or, they didn’t have ENOUGH flood insurance. In my opinion, they were irresponsible homeowners. It’s TOO EASY to properly protect yourself from financial disaster for me to have much sympathy for those who either CHOSE to underinsure or DON’T CARE enough to learn HOW to protect their assets. It’s NOT rocket science.
Sorry to sound so hostile but, it really ISN’T rocket science. Any Jr. High drop out can read an insurance policy AND understand what it is saying. There is no “fine print” and there is no “legaleez”. No excuse for not knowing. No excuse for not getting proper coverage. None.
Lynda there is no court in the country that has ever adopted the version of ACC that Natiownwide used and the others tagged onto here after Katrina (as the Mississippi Supreme Court made clear). If you would take the time to LEARN what happened instead of indulging your cognative biases and denial, you would be dealing in the realm of fact, not the self serving industry spin that helps you sleep at night. Simply put the fact you have a monetary interest in this it has clouded your better judgement.
Nationwide had a duty to their insured to defend the claim not try to low ball. Once fault was clearly established the claim should have been promptly resolved. The jury saw that 3 years after the fact and Nationwide and their dupe insured paid big. Nationwide has a well deserved reputation for screwing elderly people BTW.
As far as insurers intentionally screwing people it is obvious you missed the McKinsey paper contraversy at Allstate. The shame is that reputable insurers will die on the Allstate/State Farm/Nationwide hill of shame defending the indefensible rather than attacking the cancer that grows from within.
Since I understand the behavioral sceince behind the denial I’m neither angry nor hostile though I would urge you to take time to learn what really happened here instead of blindly blaming the victims.
sop