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AHIC 4/11/2012 Meeting
Attendees:
Judge Tim Russell (Chair), Gary Ellis,
Representative Joe Faust, Geoff Plott,
Representative David Sessions, Michelle Kurtz,
Representative Steve McMillan, Carl Schneider,
Commissioner Julie Magee, Don Price,
Jerry Workman, Tom Malone,
John Caylor, Wayne Parker,
Rux Bentley, Joe Ruffer,
Ben Woodruff, & Joe Demos.
Opening Remarks:
Chairman Russell began the meeting by stating that the Commission has made good progress, but that time is moving quickly, especially with the legislative session. In describing the meeting’s agenda for the day, Chairman Russell said Dr. Robert Hunter will have an hour long presentation to begin the meeting, after which the Commission will look at creating four sub-committees from the Commission. These four sub-committees will have the responsibility of writing a report which will tie in to the report which Auburn is doing for the Commission. Each sub-committee will be assigned to one of the main general categories and will submit a written report at or near June 1, 2012. Chairman Russell said this does not mean the Commission would stop; rather it means the Commission will have a report, in addition to the Auburn report, to give the Governor and legislators. The Commission’s work would continue on beyond these reports. Chairman Russell added Dr. Veal has a concept of a regional conference which he would like the Commission to discuss.
Commission member Michelle Kurtz asked about the nature of the reports and the Auburn report. Chairman Russell explained the Governor would like to have a written report on where we are and the progress which the Commission has made. Chairman Russell added there is a good deal of expertise on the Commission in areas of concern and the sub-committees can use the expertise to sharpen the focus of these areas.
Dr. Robert Hunter’s Presentation:
Dr. Hunter is the former Director of the Texas Department of Insurance. He presented his thoughts and research via telephone conference and through handouts which were provided to the Commission members. He has worked as a consultant with various states regarding “low frequency/high severity event” such as earthquakes, hurricanes and tornados. Dr. Hunter explained he has been studying these events since the 1970s.
He began his presentation by discussing his research of the economic cycle of the property and casualty insurance industry. Dr. Hunter said that by his tracking, prior to 1992, the insurance industry was able to “weather catastrophes pretty well”. However Hurricane Andrew had a major impact in the insurance industry and their profitability. Following the devastating losses caused by Andrew, the insurance industry had to “radically change” how they do business. The insurance companies said they need to use models which provide thousands of years of data. The insurance companies also said they need to restrict coverage, for example by charging hurricane deductibles and putting caps on replacement costs. Finally, the insurance companies said they need to “dump” the higher risks by putting them into a state or federal government pool.
Dr. Hunter explained there was consensus among the state’s governments and consumer advocates that changes needed to be made and he endorsed the changes. Dr. Hunter said insurance executives told him once these changes are in place, the insurer’s ability to write coverage, restrict coverage and prices would not change. Based on these assurances, Dr. Hunter, while Director of the Texas Department of Insurance, told his citizens that while these changes will hurt in the short run, it would bring stability to an otherwise unstable insurance industry. Dr. Hunter said he told the Texas coastal citizens “the pain would be inflicted once”, and then there would be stability. Then, in 2004 and 2005, then Katrina, the insurance companies “did it again” and “reneged on all their promises”. Dr. Hunter felt he was duped by the insurance companies. He said they (insurance companies) were either price gouging or they mismanaged their previous changes.
Dr. Hunter further explained that the insurer’s ratio of risk per every dollar of surplus is at a historic low. He said it is a very safe industry. He said most experts agree that the risk ratio should be 1.5 to 1, but now it is in the order of .8 to 1.
Dr. Hunter addressed the way insurers eliminate the risk of hurricanes by using reinsurance and risk aversion strategies. He said insurers put the risk back on to the consumer by use of deductibles, caps on replacement costs and the anti-concurrent causation clause. Dr. Hunter said if all of the disasters including the 911 event occurred in this year alone, the insurance companies would still have a very safe leverage ratio.
Dr. Hunter explained in the past thirty years, there have only been three years in which the insurance companies made an underwriting profit. The insurance companies’ large surpluses have come primarily from investment income. He concludes an underwriting profit is not essential to an insurance company’s financial health. He stated the largest impact to insurance companies’ financial health has not come from any natural disaster, but instead came from the financial crisis.
Dr. Hunter’s presentation continued with his explanation of use of models and how they can often be inaccurate and that companies which produce models compete with each other and may produce models which are more favorable than others to insurers. He believes insurance companies should make their actuarial data public. He stated the lack of competition between insurance companies may explain the diversity of rates. Dr. Hunter provided information on why regulation is necessary for homeowner’s insurance. He contends most people lack a fundamental knowledge or understanding of what they are buying. Most people are not lawyers and they do not understand their policies. He cited after Katrina, most people didn’t understand the anti-concurrent causation clause and didn’t realize their claims would not be paid under this clause.
Dr. Hunter recommended exploring a multi-state compact. The states can work together to develop a regulatory model and create a multi-state reinsurance mechanism. He also recommends banning the anti-concurrent causation clause and suggests collection of data. Dr. Hunter believes carriers should use several models, instead of just one and that modelers need to be regulated as an advisory organization. He suggests the federal government can offer opportunities to provide assistance to Alabama in development of regulatory models and data collection. Dr. Hunter also said mitigation is very critical in helping resolve the problems.
He concluded his presentation and offered to take questions.
Chairman Russell thanked Dr. Hunter for his extensive research and described the diversity of the Commission to him. Chairman Russell said there were legislators, consumers, HHII representatives, realtors, attorneys, professors and industry representatives on the Commission.
Dr. Hunter was asked about his thoughts regarding the multi-state compact and the impact on risk comparing Alabama’s limited coastline as compared with Texas and Florida’s coastline. Dr. Hunter acknowledged every state has a different risk. He suggested the models would be worked out that addresses the exposure. Dr. Hunter said the federal government could help prepare a multi-state model.
Chairman Russell asked for Dr. Hunter’s thoughts regarding a Hurricane Facility and Authority which would deal with deductibles on insurance/financing arrangement which would be funded by money from the BP fine money. The deductibles would be large enough so that the companies could give a substantial premium credit. Dr. Hunter said the higher the deductible, the lower the premium and a facility as described by the Chairman would encourage policyholders to take a higher deductible.
Commission member Carl Schneider asked Dr. Hunter if the surplus numbers he referred to include all carriers, or was it solely P
& C carriers and if it includes all carriers, how can he make the relationship between the surplus for all companies versus companies that only take on the risk of property. Dr. Hunter replied it is based on all companies. He added only a small handful of companies don’t write property. Mr. Schneider asked Dr. Hunter about leverage ratio and in particular some of the startup companies which have gone into Florida and are running a five or six to one ratio.
Additionally, Mr. Schneider asked Dr. Hunter to further clarify his comments regarding how P& C insurers eliminate risks.
Commission member Michelle Kurtz asked how one state could initiate a multi-state type of entity. Dr. Hunter said there was a meeting in Atlanta several years ago which was initiated by Florida’s Department of Insurance. He suggested contact between the states’s Departments of Insurance. There was discussion on the viability of the Federal Flood Program.
The role of the federal government was discussed and clarified as having an advisory role in the capacity of data collection and not regulating what the states are doing.
Representative Joe Faust discussed the feasibility of using the BP money and the bond money from Raymond James to start Alabama’s own reinsurance pool. Presently a lot of reinsurance money is going overseas. Dr. Hunter is of the opinion the state could make money if a reinsurance pool is carefully constructed.
There was additional discussion on the collection of data from insurance companies regarding cause of loss information.
Dr. Hunter’s presentation and question/answer session was concluded. Chairman Russell thanked Dr. Hunter for his work and sharing his expertise and knowledge.
Representative Joe Faust addressed the Commission and stated there is agreement on the fact there is an insurance crisis in Baldwin and Mobile Counties. But the crisis is not limited to these areas and he foresees the crisis spreading across the state. In that context, he sees a need to have a meeting with all involved parties, particularly the insurance executives. Representative Faust said it’s no secret there are billions of dollars in the form of reinsurance being pumped out of this country. An earthquake in Italy or tsunami in Japan affects reinsurance which causes our rates to go up. We need a mechanism set up to keep the money at home.
Dr. Veal of Auburn distributed a report compiled by his staff. The report compiled and collapsed issues which were previously reported. Dr. Veal organized the information in a better situation which allows for better conversation and direction. The report summarizes all of the ideas in a concise report. Dr. Veal asked the Commission to take a few moments to read the report and make corrections or comments. There were questions asking to clarify some issues and their general categories. The Commission discussed its interest in the multi-state compact and additional discussion of how best to benefit from the BP money. For example the deductible funded program could be a beginning point on a regional basis, with each state’s contribution relative to its exposure.
Dr. Veal confirmed the latest report produced is a cumulative report of all issues previously agreed upon. He added this is the time to make corrections to the report. It was suggested to change “local building standards” to “Building Construction Data”.
A question was raised about the process for adding issues which weren’t previously discussed. An example is exploration of the multi-state compact. After group discussion, it was decided the sub-committees would flesh out and explore these and other ideas which are appropriate to their sub-committee’s topic.
There was discussion on how to form the sub-committees and how to allocate resources and knowledge/experience of the Commission members to best address the identified issues. After further discussion, it was decided four sub-committees would be established. There will be a sub-committee assigned to Education issues, a sub-committee assigned to Regulatory issues, a sub-committee assigned to Statutory/Legislative issues and a sub-committee assigned to Mitigation issues. Each sub-committee will have seven Commission members and a representative from Auburn. Each Commission member will send their top three preferences regarding on which sub-committee they would like to serve. Chairman Russell will appoint a chairperson of each sub-committee. Each sub-committee would meet at their convenience and will issue a written report within a six week deadline (on or near June 1).
There was further discussion regarding the makeup of the sub-committees and whether or not a non-commission member would be able to serve on a sub-committee. It was decided that the sub-committees would only be comprised of Commission members and their appointed faculty advisors. Chairman Russell stated each sub-committee can use assets of whatever resources they want, but the sub-committee’s members are restricted to the members of the Governor’s appointed Commission.
After further discussion, the meeting adjourned.
Read official minutes of AHIC 4/11/2012 Meeting
Posted 4/9/2012
ALABAMA DOI RESPONDS TO QUESTIONS
FROM AHIC COMMISSIONERS
Below are examples of DOI responses to questions that Michelle and Don Price put to them in writing. At the moment there is no plan to straighten out the "yes-no" and "not-wrong-just different" answers. The prevailing sentiment in the room at the AHIC is that the hurricane catastrophe models are accurate and and that charging coastal customers more for fire insurance is based on sound, fair actuarial reasoning.
Question: Is it a fair representation of this DOI policy (or Alabama law) to say that in some instances the DOI permits insurance companies to charge different parts of the state different prices – and the difference in prices is based on non-actuarial reasons?
DOI Answer: Yes and No. Companies often file their actuarial indications by territory with the DOI, and the DOI never permits a company to charge a territory a higher rate than indicated. Therefore, differences in prices may be for actuarial reasons. But, as explained in the previous answer, the DOI will permit companies to charge a territory a rate lower than is indicated, reflecting that company’s marketing (i.e. non-actuarial) strategy.
Question: Accuracy of premium rates being used is questionable since they were developed based upon modeled projected hurricane costs which
the modelers have admitted are erroneous
and overstated by over 40% for coastal Alabama.
DOI Answer: The DOI doesn’t believe modelers have said the models are erroneous…..they have said that based on new data they have revised their models, which, in the case of RMS, has lowered the estimated losses on the coast. In the past, RMS estimates on the coast have been substantially higher than the AIR estimates; now they are lower than AIR estimates. Each insurer must decide whether the AIR or RMS models better reflect their exposure to loss. Some insurers use an average of the two models since they are not sure which model is better, while some insurers only use one model.
Click on this link
to read a complete list of the questions posed by Michelle Kirtz
and Don Price, and answers from Alabama Department of Insurance
.
Revised 4/10/2012
AHIC 3/26/2012 Meeting
Read official minutes of AHIC 3/26/2012 Meeting
Posted 4/9/2012
AHIC 3/12/2012 Meeting
Read official minutes of AHIC 3/12/2012 Meeting
Posted 3/19/2012
AHIC 2/29/2012 Meeting
Read official minutes of AHIC 2/29/2012 Meeting
Posted 3/8/2012
AHIC 2/10/2012 Educational Meeting
Read official minutes of AHIC 2/10/2012 Educational Meeting
Posted 2/26/2012
AHIC Educational Meeting Postponed
The education session planned for Monday, January 30, in Montgomery is officially postponed. A reschedule date will be provided very soon.
The one speaker scheduled to present in-person at the session has an unexpected conflict that prevents him from being in Montgomery that day. In addition, several AHIC members, including legislators critical to the AHIC efforts, have reported they will also be unable to attend on Monday. Chairman Russell believes asking the other AHIC members to drive several hours for one videoconference presentation and discussion without a significant number of participants is unfair.
Chairman Russell is currently attempting to reschedule for the first or second week of the legislative session, which begins February 7. He is extending invitations to legislators in leadership positions to join that session. Both speakers originally scheduled for the January 30 session will be included in the rescheduled session.
Signed: Renee Carter
Updated1/27/2012
AHIC 12/12/2011 Educational Meeting
Read official minutes of AHIC 12/12/2011 Educational Meeting
How to Deal With Catastrophes
Posted 1/5/2012
KAREN CLARK TO PRESENT AT DECEMBER 12
AHIC EDUCATIONAL MEETING
Karen Clark is an expert in the field of catastrophe risk
assessment. She developed the first hurricane catastrophe model
in 1983 but she is now worried that models are being given more credit and influence than they deserve.
Read and listen to her
Presentation on Model Limitations to
the National Association of Insurance Commissioners. Also
read a follow up presentation
on Using Catastrophe Models and Other Tools to Assess Hurricane Risk.
You can read much more about hurricane risk modeling
here.
Posted 12/2/2011
AHIC 11/7/2011 Educational Meeting
Read official minutes of AHIC 11/7/2011 Educational Meeting
Posted 11/17/2011
PRESENTERS FOR AHIC EDUCATION PHASE
HHII has asked the commision to approach the undernoted experts
to make presentations during the education phase.
Robert Hunter with Consumer Federation of America.
Ex-Texas DOI commissioner.
Amy Bach with United Policyholders of America
Karen Clark with the catastrophe modeling company of Karen Clark & Company
Gene Taylor, ex-US Senator of Mississippi who promoted the Multi Peril bill
Pat Maroney, who works for the Florida Hurricane Commission and could report on the viability of a multi-state solution.
Posted 10/21/2011
AHIC 10/17/2011 Listening Meeting
Read official minutes of AHIC 10/17/2011 Listening Meeting
Posted 10/29/2011
AHIC 9/26/2011 Listening Meeting
Read official minutes of AHIC 9/26/2011 Listening Meeting
Posted 10/6/2011
9/12/2011 Listening Meeting
Read official minutes of AHIC 9/12/2011 Listening Meeting
8/29/2011 Listening Meeting
Read official minutes of AHIC 8/29/2011
Listening Meeting
Written comments submitted at 8/29/2011 Meeting
Mail received by AHIC following 8/29/2011 Meeting
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Insurance commission votes for proposals
3/27/2012
article by George Altman, al.com Capital Bureau
The Affordable Homeowners Insurance Commission on Monday
(3/27/2012) voted to support three proposed changes to insurance laws and made plans to decide on other proposals at a meeting next month. This marks the first time since the group was created almost a year ago that it has voted on specific bills to address insurance problems.
An insurance industry lobbyist and a grass-roots consumer group also appeared to come to agreement on what’s been dubbed the "clarity bill," a sometimes-contentious industry information disclosure measure.
Both consumer and industry advocates hailed Monday’s action as a significant step for the commission, created by Gov. Robert Bentley to address problems with insurance availability and affordability.
"I’m really encouraged that we’ve made the progress that we’ve made to ... focus on specific issues and recommendations," said Rep. Steve McMillan, a Gulf Shores Republican and commission member. "It’s big, and I think it shows that we’re starting to build a consensus."
Commission approval of bills currently before the Legislature could greatly improve their chances of passing this session, lawmakers said.
The group on Monday voted in favor of proposals to:
* Create catastrophe savings accounts, which would give homeowners tax benefits similar to retirement or health savings accounts on money they set aside to help pay for costs from a major storm.
* Require that insurance companies, which must by law offer premium discounts to homeowners in Mobile and Baldwin counties who build their homes to meet building codes, offer the same premium discounts to homeowners statewide.
* Allow captive insurance companies to sell auto insurance, get funding from private investors or major insurance companies, and be created statewide. Captive insurers are limited to selling policies within certain areas or to only certain policy holders and are intended to help provide coverage to people living in areas where insurance is particularly scarce or expensive.
The commission also voted to request $100 million of oil spill fine money to fund the Strengthen Alabama Homes Program, a trust fund to help homeowners pay to make their homes more storm-resistant. The state still is waiting for federal officials to direct the fine money, expected to total in the billions, to Alabama and other Gulf Coast states.
The group delayed action on the clarity bill, which would require insurers to publicly disclose the number of policies they write, the premiums they charge and the losses they incur. The information from all insurance companies would be combined and put into a database, searchable by ZIP code.
Industry representatives said that not all insurers keep such information, and finding it would be costly for those that do not.
But after the meeting, members of the Homeowners’ Hurricane Insurance Initiative, who support the bill, and Knox Argo, an American Insurance Association lobbyist who spoke in opposition to the measure during the meeting, agreed to a compromise.
Under the compromise, insurers would have to detail how much each type of coverage, such as wind or fire, contributed to their losses, but they would not have to provide such detailed information for their premium charges and could merely show their total premiums for all types of coverage.
Sen. Trip Pittman, the Montrose Republican sponsoring the bill, said he and Argo have discussed a similar compromise in recent weeks. But representatives of Alfa Mutual Group, which may be key to the bill’s passage by the House, have not indicated how they feel about the idea, Pittman said. Efforts to reach an Alfa spokesman were unsuccessful Monday.
Sen. Ben Brooks, R-Mobile, said he thinks the commission "turned a very important corner" Monday, but he added that the work is far from over.
"There’s still a long road ahead, both in the Legislature and for the insurance commission."
Read related MPR editorial
here.
Read HHII commentary on
proposals
Updated 3/28/2012
Affordable Homeowners Insurance
Commission visits Decatur
Read complete 10/18/2011 post by Brian Lawson, The Huntsville Times
Sharp rises in deductible rates, buried in the fine print.
Homeowners' insurance policies canceled unless the customers add an auto insurance policy.
People who cannot get a new homeowner's policy, even if they've never made a claim, because they were part of a mass cancellation of polices.
The problems described by area residents in Decatur on Monday night were not simple and neither is the task facing the commission appointed by Gov. Robert Bentley to develop proposals for lowering homeowner's insurance rates.
John Caylor, regional chair of the commission, said he's been struck by the scope of the difficulties homeowners are facing across the state and the depths of despair about a lack of affordable policies.
Jeanine Fowler, who lives in Logan in South Alabama described the plight she faces. Fowler and her husband, who is in the Navy and has spent the past three years in Afghanistan, have a modest home, not on the water. She said in shopping for a policy, the quotes ranged from $2,700 to $6,000. She took the lowest rate, but it's a third of her house payment. She said a friend who lives nearby in Florida, but on the water in a house similar to hers, pays $1,300 a year. Fowler said she lost her job in June and she expects her rates to go up next year. "We're trying to raise a family, but that's really hard to do in Alabama," she said.
Jimmy Hester, a longtime coach in Decatur, seemed to sum up the feeling of many in the crowd as he described being surprised to learn his policy deductible had jumped from $500 to $1,700 in one year. "It was in the fine print," he said. "If you're going to increase something that much, you need to do it in big, bold print."
Alabama Sen. Ben Brooks, R-Mobile, said he is continuing to work on legislation to help lower homeowner's insurance rates across the state.
Posted 10/19/2011
Homeowners Insurance Commission meeting in Tuscaloosa draws small crowd
Read complete 9/12/2011 article
by Martin Swant --- The Birmingham News
Although Tuscaloosa was one of the cities hit hardest by the April 27 tornadoes, public participation in the Affordable Homeowners Insurance Commission's hearing Monday night was sparse.
The Tuscaloosa hearing at the University of Alabama was the third of five hearings around the state. Last month, more than 700 people attended a previous hearing in Mobile with many expressing anger over the price of their property insurance.
One person who did speak Monday was Johnny Chaney of Fairhope. He dropped homeowners insurance in 2005 when his annual premium was $2,400, he said, because he hadn't had much damage from past storms and decided it was too expensive to keep. However, now that his home is paid for, he worries about what could happen if a storm does hit his house sometime in the future. "I'm at the mercy of FEMA if a storm does come through and destroys my home," Chaney said.
Posted 9/14/2011
No insurance crisis evident in Dothan;
meeting draws small crowd
Read complete 8/31/2011 article by
Jeff Amy, Press-Register
Read official minutes of AHIC 8/30/2011
Listening Meeting
Tuesday in the state’s Wiregrass region, fewer than 40 attendees rattled around a city gymnasium for a meeting with the Affordable Homeowners Insurance Commission. Only four people spoke.
Convincing people who are farther away from the coast that they should worry about insurance problems was difficult before April’s tornadoes. Efforts to make insurance changes have been dogged by accusations that relief on the coast would mean higher rates upstate.
Sandra Ball of Dothan asked whether that was the commission’s aim.
“I don’t know what is fair,” she said. “That’s what I’m asking you.”
The commission members in some ways tried to persuade the small audience that the problem was something the whole state should worry about.
“In my district and my county, it’s a real crisis,” state Sen. Ben Brooks, R-Mobile, said. “I also look forward to making the case why it’s a serious issue around the state and not just in Mobile County.”
Posted 8/31/2011
Forum Held in Dothan to Hear Citizens Concerns About Homeowner's Insurance
Read complete 8/31/2011 report by WTVY's
Deanna
Bettineschi
"Us citizens are trying to figure out why there are such differences in premiums"
Many wonder if the price of homeowners insurance will ever become more affordable.
Right now they're worried they won't be able to pay premiums if the price continues to climb...especially in coastal areas.
"The statewide averages is about eight hundred and fifty four dollars and that includes everything, liability, fire, wind and hail...plus a modest deductible of around five hundred dollars....well my premiums are three thousand one hundred dollars and my deductible is seven thousand dollars." Representative of
Homeowners Insurance Initiative
Michelle Kurtz said.
Those groups included insurance companies.
Agents say the business is highly regulated and needs to have competitive rates to stay in business.
They believe homeowners have to expect higher rates if they are in an area of higher risk.
"Areas that are more susceptible to catastrophes and particularly coastal areas are typically going to pay a higher premium based on expected losses and historical losses." Jack Brunson with the National Security Fire and Casualty Company said.
Michelle Kurtz is hoping to get this clarity bill passed.
The whole point of it is so home owners can compare premiums.
"We would ask aggregate data over the last ten years of the number of policies, dollar amounts of premiums coming in, the dollar amount of claims going out, so we can see the ratios throughout the state." Kurtz said.
Many are grateful Governor Bentley is so committed to improving homeowners insurance in Alabama.
They also believe going statewide to hear citizens concerns is a step in the right direction.
Posted 8/31/2011
INSURANCE COMMISSION HEARS
BALDWIN & MOBILE COUNTIES' PAIN LOUD AND CLEAR
Picture & additional material from
article by Gabriel Tynes
on BaldwinCountyNOW
Hundreds showed up hoping to let the Commission hear their
stories of pain and frustration. Time constraints limited
the number who could speak but Sen. Ben Brooks was fair and
efficient in managing the time allocated and calling individuals
to the microphone.
The meeting was opened with prayer, as HHII had requested.
One speaker later expressed his appreciation and said he
believed lack of prayer contributed to the moral terpitude
plaguing the insurance issue.
Many of the stories echoed those on
HHII's Stories page. Other speakers stressed this was
not just an issue for homeowners but for small business owners,
too, who could not absorb the increased cost for
insurance.
Carolyn Vaisin of Fairhope said, “I just can’t understand where
the insurance companies have any liability except if our homes
are taken completely off the slab." Vaisin, who is on a
retirement income, said her premiums increased from $2,000 to
$7,500 before she found a company that lowered it to just under
$5,000 per year. “We’ve got to get back to reality. It’s a
terribly unfair situation.”
Stan Virden, representing the Homeowners Hurricane
Insurance Initiative, said, “some of us are paying six
times what we were before 2006. We have found that there is no
sound actuarial basis for these rate increases and we need
clarity on why our rates are so distorted.” Virden pointed out
that this was the third state commission to study insurance
reform, but “the major thing that has been suggested so far is
fortification, which we support, but many of us do not have
homes that can be raised to that level. We need the commission
to come up with recommendations that will fix premiums today if
you want to fix the problem."
The need for transparency, and passage of the
Transparency Bill, was
repeatedly stressed. Mayor Kant said Department of
Insurance (ADOI)members should be elected like the PUC, and that
insurance books should be open for public inspection when rate
increases are requested.
Starke Irvine, speaking on behalf of the Baldwin County
Association of Realtors, echoed that urgency, and said his group
was strongly in favor of passing the Property Insurance Clarity
Bill, which would require insurers to be more transparent by
providing data about policies and premiums written in the state
along with actuary and risk calculation information.
“What (the clarity bill) would do, in my opinion, is solve a
problem that the insurance companies have developed themselves
in the area of trustworthiness and dependability.” Irvine, who
served on the Alabama Insurance Commission for seven years, said
a similar bill is in place in Texas and it would be easy to
implement given today’s digital infrastructure. “We want to see
what you collect and what you pay out. We think that’s a fair
thing to ask for, so when you tell me my premium is going up 500
percent I’ll understand it better,” said Irvine.
Several speakers questioned the effectiveness of the ADOI in
protecting the consumers' interests or expressed the opinion
that the department was beholden to the insurance industry and
its lobbyists. Although these remarks were not intended as
a personal attack on Commissioner Ridling, he was clearly
discomfitted by most of what he heard.
Among the suggestions for reducing premiums were allowing the
purchaser to decide and buy only the coverage they needed, not
what the insurance company said they had to have; and
determining reconstruction costs base on actual local - not
national - averages.
See more comments concerning the meeting on the
HHII Forum
Revised 9/3/2011
Overflow crowd calls on insurance commission to lower rates
Read original article by Jeff Amy, Press-Register, 8/30/2011
An overflow crowd of more than 700 people, mostly angry about how much they pay for property insurance, pressed the Affordable Homeowners Insurance Commission for relief Monday night.
People sat on the carpet of the Arthur R. Outlaw Mobile Convention Center as speakers repeatedly told the panel that they were at the breaking point financially, unable to afford higher premiums.
Darla Hayes of Mobile said she was a single mother, who worked long hours to afford her home. “I sit knowing that I may not be able to sit in that home next year,” Hayes said, her voice cracking.
A.R. Grimes of Theodore said he dropped his wind coverage rather than pay the cost.
“I decided I was not going to pay for my home and then rent from the insurance company,” Grimes said to applause.
The panel, charged by Gov. Robert Bentley with making insurance cheaper and more available, held the first of five public hearings.
Another is scheduled at 6 tonight in Dothan, followed by meetings next month in Tuscaloosa, Decatur and Guntersville. The group is supposed to issue recommendations for Bentley to forward to a special session of the Legislature.
Among the common themes Monday night were retired and working people whose incomes don’t increase at the same rate as premiums. Also repeatedly raised was the specter of having to pay a large deductible after a storm.
Several speakers also said that they felt efforts to tighten building codes should not be the main focus of the commission’s effort.
Baldwin County Probate Judge Tim Russell, who chairs the group, said Monday was valuable because it gave commission members from outside Mobile and Baldwin counties the chance to gauge the depth of coastal residents’ frustration for themselves.
“It’s like seeing out into the future, hearing what you guys are talking about now,” said panel member Liz Huntley of Clanton, referring to fears that insurers could drop coverage and raise rates in the rest of Alabama following the April tornadoes.
It was clear that many attendees were tired of talking about their problems and were ready for action.
“I think it’s time for the Legislature to get on with it,” said Louisa Toler, who lives east of Daphne.
Linda King of Cypress Shores said she worried about being covered by a surplus lines company, which is only lightly regulated by the state. “Find a way to lower premiums,” she said. “The way I see it right now, the deck is stacked against the consumer.”
Stan Virden, representing the Hurricane Homeowners Insurance Initiative, pressed for the citizens’ group proposal to force insurers to reveal what they charge in premiums and pay in claims in various areas.
“We have found there is no sound actuarial basis at the Department of Insurance for these premiums,” Virden said. “We need clarity on why our rates are so distorted. We need equity on availability and cost.”
A number of people said that 5 percent hurricane deductibles, now required by most carriers, have shifted too much risk onto property owners.
Severia Morris, of the United Concerned Citizens of Prichard, said she faces a $7,500 deductible, and doesn’t know how she’d pay it.
“What is going to happen to us?” Morris asked. “We have worked all of our lives and retired. There seems to be no hope for us.”
John Williams, the president of the Mobile Home Builders Association, said builders have been forced to construct stronger houses by new building codes, with a promise that residents of stronger houses would have an easier time finding coverage. He suggested insurers weren’t keeping their end of the deal.
“The underlying goal of the insurance industry is not safety,” Williams said. “It’s to have no insurance claims.”
Fairhope Mayor Tim Kant, who suggested tax credits or favorable rates for senior citizens, said demands for ever-stronger building codes were unworkable.
“Building concrete bunkers and cutting down all the trees in Fairhope is not an option,” Kant said. “We need relief now, not six more years of talking about it.”
After hearing from consumers, the commission agreed, among other things, to appoint a special panel to explore multi-state solutions. State Rep. David Sessions, R-Grand Bay, has been added to the panel, giving it 31 members
People who would like to send comments to the panel can write to:
Affordable Homeowners Insurance Commission
c/o Alabama Department of Revenue
4112 Gordon Persons Building
50 North Ripley St.
Montgomery, AL 36132
Posted 8/30/2011
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