Jason Horn (the Insurance Guy)'s letter to Senator
Shelby
Dear Senator Shelby,
I want to thank you for taking the time to read this. I am writing this on
behalf of the roughly 500,000 people of Mobile and surrounding areas,
including Baldwin County, Al. I am an active member in the Eastern Shore
Chamber of Commerce. I am involved in two committees, Governmental Affairs
and the Insurance Sub Committee, as well as an Ambassador. My goal in
writing you this letter is to inform you of the dire crisis we face as a
community in South Alabama. Insurance Reform is no longer an option, but a
crucial mandate for our area to survive, much less flourish.
I would not attempt to bring this to your attention if I did not feel it
was a matter that is worthy of national attention. I am an Insurance Broker,
specializing in Homeowners Insurance in Baldwin County. My clients consist
of residents of Baldwin and Mobile county. I moved here around a year and a
half ago, so I have a unique view of the situation. I have not witnessed a
major storm on these shores, but as a former Catastrophic Claims Adjuster, I
have been present in many dire situations. I was one of the first to arrive
after a major hurricane/tornado. I have witnessed the devastation that a
Category 3 or higher storm can bring to an area. Enough about me.
I understand that many think that there is no crisis affecting South
Alabama. As I understand, this is where the wealthy folk of the State live
and work. I myself have not met many of these wealthy people, but each and
every day I talk to the average citizens that make up the bulk of our
community.
In 1969 Hurricane Camille roared ashore, primarily on the Mississippi
Coast. While doing substantial damage to both states, the storm quickly
moved inland, flooding large areas of Kentucky and even West Virginia and
Virginia (my home state).
In 1979, the one that people still mention to this day, Hurricane Frederic
was the costliest hurricane to ever hit the Gulf Coast, until Andrew and
Katrina. On the night of September 12th, my birthday, Fredric made landfall
on Dauphin Island. This storm changed Gulf Shores and Alabama forever.
In 1997, Hurricane Danny entered the Gulf of Mexico and made landfall,
affecting Alabama. Danny was widely known for the large amounts of rain fall
and flood. Danny went on to affect Massachusetts with record rain and wind.
In 1998, Hurricane Georges affected Alabama, but causing far more damage in
other states and countries, making landfall a total of seven times during
its formation.
2004 gave the Gulf Coast Hurricane Ivan, making landfall with 132 mph
winds. Gulf Shores took the brunt of this storm as a Category 3. This was an
unusual storm, being the 6th most intense storm on record, with a minimum
pressure of 910 millibars. Ivan may have the largest ocean wave ever
recorded, ranging from 91 feet to 131 feet. Ivan also continued to proceed
to the north, devastating Kentucky and Ohio with record amounts of rain and
flood.
2005 was, well, the Katrina years. We all know about the destruction caused
to New Orleans. While almost destroying New Orleans, it also caused damage
here locally, in Alabama.
But, through all that, many of the residents and homes survived. And
businesses re established and communities continue to try to grow.
First of all, to even attempt to predict the future, we must learn about
the past. As I understand, several years ago, pre Katrina, hurricane
deductibles were optional, allowing the homeowner to save premium by opting
for a separate deductible. Generally, this deductible is a percentage of the
structural amount. It is unknown to anyone why it’s a percent of the full
structural amount, and not of the damage caused. For example, if the
structure is insured for $200,000 and the damage is $50,000, a reasonable
person would assume that the percentage of wind deductible would apply to
the damage, not the structural coverage. A 5% deductible of the entire
amount would equal $10,000. A 5% deductible of the damage would equal
$2500.
Based on current conditions, there are no admitted carriers writing with
wind. State Farm, like many coastal states, has begun to pick and choose the
homes it wants to insure. Alfa, Farmers and Allstate recently cancelled or
non-renewed up to 14,000 home here in the Mobile area. Imagine receiving
that news in your mailbox one day. After 23 years, and no claims, the
company you trusted for a combination of insurance products is no longer
willing to insure you. Of course, keep in mind, the mortgage companies
require wind/hail insurance on the home. So, you are forced to satisfy the
mortgage requirements and find insurance somewhere. Well, for most cases,
you have two options. Geovera, a non admitted carrier, or the Alabama Wind
Pool, which is widely known as the carrier of last resort. So, you begin to
call various agents attempting to receive quotes, which all come back the
same because there simply is no competition to drive prices down. Many
times, if there is no mortgage, the client will decide to self insure.
Homeowners are reporting rate increases of 250% since 2005. The homeowner
then reads the Newspaper about more cancellations. As an example, Alfa
cancels thousands of policies, then later announces they only made $500
million profit for the year. All the while, companies are cancelling
insurance policies, but we are forced to watch their smiling faces on
commercials. They tell us they are our friends and will take care of us when
we need them, or how they can save us money by switching today.
Another thing to mention, is how the North part of the State, generally
believes they are subsidizing our rates locally. A $200,000 home in North
Alabama may cost $700 a year to insure. Many companies will fight for this
business, all admitted carriers. Yet, twice a year, tornados will pass
through and cause focused damage to towns all over the northern part of the
State. Ripping off roofs, damaging buildings that are insured for moderate
fees. That same home in Baldwin County would cost $2300 to insure, if it is
even remotely close to the shore line.
So, to recap, many of the hurricanes caused damage here. No one will deny
that. But, it also caused damage to inland cities and other states, such as
Kentucky and Ohio. Northern Alabama will receive widespread damage, from
tornados , twice a year, and we are paying the brunt of all of this.
Now, imagine the worst. It’s estimated by industry professionals locally
that as much as 20% of homeowners in this area are uninsured, typically by
choice as they simply cannot afford the premiums. A storm hits, 20% of this
community will not be able to rebuild. They will be forced to spend savings
to move to another part of the State, or even another part of the country. I
think it’s safe to assume that another 20-40% will simply not rebuild here,
due to fear of even higher increased fees from insurance companies. So now,
we are left with 40-60% of a once thriving community. Mobile was recently
named one of the top ten cities to quickly recover from a recession. With
only 40% of the community left, devastated by a storm, the area’s population
will likely continue to erode. Schools will no longer have the revenue to
operate, as a large portion of the tax base will have left the area. Our
schools are already underfunded, like many across the country. It’s
estimated!
that they have 16 hours worth of funds needed to operate in a crisis.
Businesses will begin to shut down, because they simply have no traffic to
generate revenue. Home Depot’s, hotels, restaurants and movie theatres will
close their doors. Over a very short period of time, this area will be a
shell of its former self.
A young couple decides to venture out into life and purchase a new home.
With a $800 a month budget, options are great right now. They go to a
Realtor to view houses. They choose the perfect home to begin their family.
Unfortunately, the home costs $1000 a month. Well, they can trim back on the
cell phone, cut the cable bill and make that extra $200 a month available.
It’s a stretch, but it’s also a dream. Then the Realtor contacts me, and the
price is another $240 a month for insurance. So, the builder doesn’t sell a
home. The Realtor doesn’t sell a home. The insurance agent doesn’t write a
policy. An industry segment is not stimulated to continue. And lets not
forget, the most important factor, a young couple doesn’t realize their
dreams in starting a new family.
As I have explained, we are in a crisis. It invades everyone’s minds,
dominates almost every casual conversation. It’s the top news topic for this
area. Just today, on the front page, we read how Farmers Insurance is
cancelling another 10,400 policies. Its estimated that over 50,000 policies
have been dropped/non renewed since 2005. What part of this situation is not
a crisis? We are caught in a political situation that lets the wants of a
few dictate the needs of many. We are in a situation where the insurance
companies are running the State, not the State running the insurance
companies. Insurance is primarily based upon the Law of Large Numbers. The
profits of many gain more than the loss of a few. Insurance is not a
guarantee, yet the insurance companies are creating that. I am not one that
is against profit. Profit creates wealth, wealth creates industry. I own two
businesses here locally; I get up every morning to make money. However, when
a company that pulls out from insuring the area, cancels thousands of policies states that they
only made a $500 million profit for the year, the general populace gets
confused, me being one of them. How can the northern part of the State claim
to subsidize us when we pay the outrageous rates? These storms, as stated
above, do damage here. But they also do damage in other states, far north of
us. We just pay the rates associated with the damage. Locals are beginning
to get angry about the current status here. I have heard mention that we
hold 40% of the State’s tourism dollar, with all of the States Gulf Oil
revenue. This is estimated to be 30% of the entire States revenue. One gets
the feeling that people will no longer be satisfied with asking and will
start demanding our representatives to represent us. I firmly believe that
we have to start with building better homes, more wind resistant. I also
believe that until we give competition a reason to compete, we will remain
in this situation. There is a local uproar about where the money is
going that we contribute, only to be told by State Senator Lloyd Barron “I
am 400 miles away from the coast line, I don’t have to care about the
insurance rates.” Sen. Roger Bedford, D-Russellville is quoted as stating
“that north Alabama lawmakers would frown on subsidizing the Gulf Coast. “
People are angry because we are sending all this money north, only to pay
three to four times what others in the State are paying. People can only be
consoled for so long before they begin to react. State Senator Ben Brooks
and State Senator Tripp Pittman work hard to take ideas, write a bill
proposal, only to encounter repeated resistance from law makers in North
Alabama. Why? For fear of rate increases to their constituents? Or fear of
reprimand from the large PAC’s that they represent? When a representative
of my State, of any part of it, tells me how they do not care about my
quality of life, it breaks down my belief in the entire system of government
we have in place.
My goal is to achieve insurance reform. I intend to make this a State, and
if possible, a national issue. So often our Federal and State governments
come in after the disaster to provide assistance. For once, lets be involved
before the disaster hits to minimize the disaster itself. I honestly do not
know what the solution is. I talk to others on the matter every day. There
are some sane and some radical ideas presented, but the worst ideas are
those unspoken. We need to address this situation immediately, before we
watch history re written, in a way that will not be remembered well. It
starts with competition and knowledge. We cannot stop the hurricanes, but we
can build more wind resistant homes. We can give tax incentives to citizens
that will retro fit with safety features such as wind resistant windows,
hurricane straps, etc. We can work with the insurance companies to develop a
plan to keep this area insured, instead of working against the insurance
companies. We can have better State regulation. We can have more informed
citizens by instructing on how to prepare for a storm, how to prepare for
claims. We simply must find a way to allow this area to be insurable again.
After all, the only thing worse than high priced insurance is no insurance
at all. Please focus your attention on this matter, the crisis that we are
facing. We have continued to face this alone, feeling separated and
alienated from the rest of our State. We also feel that our Northern
representatives are not representing the interests of the entire State. It
is of utmost importance that we act now, today, this very minute.
Sincerely,
Jason Horn
The Insurance Guy
Daphne, Al.
Jason.horn@mchsi.com
251-445-8777
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