Costs skyrocketed after storm
Posted on Sun, Aug. 19, 2007
By ANITA LEE
Property insurance, once a routine purchase, plays a bigger role in life decisions than it did before Hurricane Katrina.
Insurance had become a factor in what price people pay for houses, and where they live or do business. That's because insurance costs have skyrocketed and policies for hurricane damage are available near the waterfront only through the state wind pool, insurer of last resort for South Mississippi.
By design, wind-pool prices are higher than the private market because of the risk and because the state wants to encourage a private insurance market.
Katrina has focused Mississippi's attention, and to some extent the nation's, on insuring property against natural disasters. The media has followed heated litigation between insurance companies and policyholders. At one time, more than 1,000 lawsuits were pending in U.S. District Court in Gulfport, but that number has been whittled to less than 600.
Oxford attorney Richard "Dickie" Scruggs, of tobacco litigation fame, and his Scruggs Katrina Group team have taken on the most policyholder cases and settled claims with several insurance companies. Insurance companies stand by their claims-adjusting processes, and the courts have upheld their contention that they are not responsible for damage from tidal surge covered under the National Flood Insurance Program.
Debate continues over whether insurance companies also attributed wind damage to flooding to minimize their losses.
Insurance Commissioner George Dale, who has held office for almost 32 years, blamed his recent re-election defeat on Katrina and Scruggs, who pulled out his checkbook to campaign against the commissioner. Many policyholders on the Coast and Dale's opponents claim he has grown too friendly with the industry.
Several bills are pending in Congress aimed at changing the way insurance is regulated and sold. A multiple perils bill sponsored by U.S. Rep. Gene Taylor would add wind coverage to the NFIP. Sen. Trent Lott is pushing to repeal the industry's exemption from anti-trust laws. Both sued their insurance company, State Farm, for refusing to cover their losses, but the cases have been settled.
Insurance rates and availability also will continue to make headlines. State legislators and wind-pool officials have just announced some relief. Those who build to the standards set by the Institute for Business & Home Safety, an organization sponsored by the insurance industry, can get a break on the price.
"The credits for fortified construction is a win- win situation," said wind-pool board member and insurance agent David Treutel. "The homeowner spends a little more on the front end, but recovers the extra construction cost over the years through premium credits. The wind pool can charge less for coverage since the building is less likely to suffer damage in a storm. It is a long-term solution for the insurance costs in coastal areas."
Also, consumers willing to assume more risk can lower their monthly premiums by agreeing to pay higher deductibles if their property is damaged by a hurricane.
The wind-pool board recently created new optional deductibles of 5 percent, 10 percent, 15 percent, and 20 percent. Some private companies are offering higher deductibles, too. Independent insurance agents can help consumers who want to comparison shop.
Wind-pool board member and insurance broker Bobby Portwood said, "A policyholder needs to carefully weigh how much deductible he can take on, but it is one more personal option that will soon be available."
Homeowner property insurance costs
Below is an example of coverage costs for a $166,000 home. Estimates are averages.
Dwelling valued at $166,000 (rates vary according to consumer credit rating, fire protection district and home construction)
Homeowners insurance, excluding wind and earthquake: Averages $500 to $700 a year
Wind and hail, Mississippi wind pool (rates vary according to home construction, location north or south of Interstate)2 percent named-storm deductible and $1,000 deductible on other windstorm damage.
First year premium: $2,168 south of I-10; $1,891 north of I-10 (includes $30 inspection fee for first year.)
Flood with $500 deductible $264 a year.
-MATTINA INSURANCE AGENCY INC.
Original Sun Herald article published August 19, 2007.
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