Insurers canceling coastal policies (not just the gulf coast, either.)

[Maddy McCall]

Insurers Canceling Coastal Policies

With the 2006 hurricane season starting in just five weeks, many home insurers from Texas to Florida to New York are canceling policies along the coast or refusing to sell new ones out of fear of another catastrophic storm.

In the widest insurance retreat from coastal property since Hurricane Andrew slammed Florida in 1992, insurers as far north as Long Island, N.Y., and Cape Cod, Mass., are shedding coastal homeowners policies to reduce their exposure.

In Florida alone, insurers that are undercapitalized or fearful of losses have notified the state of plans to cancel more than 500,000 homeowners policies. With $2 trillion each in coastal property, Florida and New York lead the United States in coastal exposure, followed by Texas and Massachusetts.

snip/

Companies including Allstate, the United States' second-biggest property insurer, say forecasts of more major hurricanes combined with soaring coastal real estate development have created unacceptable risk in some areas.

_____________________________________________

Besides Mississippi, cuts are being made in Florida, Texas, and New York:

• Florida. Amid mass policy cancellations, state officials are declaring a crisis. Because mortgage lenders require home insurance, affected policyholders must find other insurance, probably at higher cost. Near the coast, annual premiums of several thousand dollars now rival a mortgage's cost. Florida's state-run insurer of last resort, which must provide insurance if no other company will, has a record 815,000 policies and a $1.7 billion deficit. At the urging of state Chief Financial Officer Tom Gallagher, a judge Tuesday began placing Florida's No. 3 home insurer, Poe Financial, into receivership because it lacks adequate reserves.
  
  
  
• Texas. Allstate just announced it won't write any new homeowners policies in 14 coastal Texas counties. Texas' insurer of last resort, the Texas Windstorm Insurance Association, has only $1.2 billion in cash and reserves going into the new hurricane season. The association wants to raise rates 19 percent on homes and 24 percent on businesses.
  
  
  
• New York. Allstate says it won't write any new homeowners policies in New York City, Long Island or Westchester County. MetLife also is cutting back on new homeowners policies near the coast.
  
  

Edit. Oops, forgot the link: http://www.clarionledger.com/apps/pbcs.dll/article?AID=/20060426/NEWS0110/604260354/1002/news

_________________________________________________________________

For the sake of discussion, please read this article:

Insurers Saw Record Gains in Year of Catastrophic Loss

The companies that provide Americans with their homeowners and auto insurance made a record $44.8-billion profit last year even after accounting for the claims of policyholders wiped out by Hurricane Katrina and the other big storms of 2005, according to the firms' filings with state regulators.

Top executives described the profit — an 18.7% increase over the previous year — as a fluke, the product of gains in other lines of insurance besides homeowners and a very good year for their investments.

They said that even with the increase, insurers face deep problems that can be fixed only by substantial premium hikes, a scaling back of commitments by several firms to the most disaster-prone portions of the country and, according to some, a greatly expanded role for the state and federal governments in insuring individuals against the largest of catastrophes.

snip/

While premiums for homeowners insurance have increased by more than half since the early 1990s, coverage, especially in disasters, has shrunk. Historically, insurers covered a little more than 60% of total losses in disasters, according to Hartwig, the industry economist. During the 2004 hurricanes in Florida, they covered less than 50%, according to Hartwig's numbers. During Katrina, he said, they covered about 30%, due in part to the high flood damage.

http://www.latimes.com/news/nationworld/nation/la-na-insure5apr05,0,3061059.story?coll=la-home-headlines

[htuttle]

1. Well, isn't that nice

They take your premiums for years, then they make sure to cancel the policy before there's a chance that you'll actually need it.

Big Insurance is one of the most lucrative 'industries' in the US (if not on the planet). They like to keep that quiet, though. No need to attract undue attention...

[Tesha]

4. Your premium paid for that year's coverage.

If they provided insurance coverage for the year during
which you paid the premium, you got what you bargained
for.

Tesha

[Maddy McCall]

7. If only insurance companies would look at it like that.

Instead, if you filed even a small homeowner's claim five years ago, they consider that in this year's premium, which will be higher than if you had not filed that claim five years ago.

[superconnected]

27. what if you paid for a year but they drop you 5 weeks before

hurricane season, of that year.

[Tesha]

40. Check your contract (Policy)

*IF* they refund the pro-rated portion of your premium,
they may be within their rights under the contract (although
I'd agree with you that it's a dirty thing to do).

If they don't refund or if their policy doesn't allow their
arbitrary cancelation in mid-term,, they're clearly on the
wrong side of the law; sue them in Small Claims court seeking
"specific performance under the contract".

Tesha

[ChairmanAgnostic]

35. PLUS they make it a REQUIREMENT for auto use and home sales.

the biggest mobsters in the states.

[Vinnie From Indy]

2. Gee, insurance companies shafting people!

What a surprise.

[Tesha]

3. Does this really surprise anyone? Other than those folks that insist...

Does this really surprise anyone? Other than those folks
that insist that NOLA *MUST* be rebuilt on-site?

Thanks to us, "the coast is toast" and the sharp-
pencilled actuaries at the insurance companies have
not only figured this out, they're starting to act
on that fact.

Tesha

[Maddy McCall]

8. You ever been to New Orleans?

[Tesha]

41. Yes, I've been there. (NT)

[Gormy Cuss]

10. They figured out that the coast was toast long ago.

The difference now is that after sustaining a hit last year they will get less opposition from state insurance agencies. They are using the 2005 losses to leverage their political clout. It is exactly the same way policies evolved in California after the Loma Prieta quake.

What I wonder is how long it will take for regulators to pressure the mortgage industry to dump mandatory homeowners policies, or for the mortgagors to reassess whether their portfolios are afforded much protection given the mounting stack of hazards excluded from standard policies.

[IthinkThereforeIAM]

14. Building on flood planes...

... has always been a folly. That is what drives up home insurance rates, the endless draining of wetlands and developing those said areas that flood every three or four years, then coughing up the money, either from insurance companies or the government to rebuild. This has been a peeve of mine for a few decades. I wrote letters to my senator back in the 80's concerning this. Give them a one time payout, they can stay where they are, in the flood prone area, and never again be able to file a claim on water damage, or, take the money and build in a more sensible place, ie.... high and dry.

[Mend]

15. have you ever seen a nice in-land area after some tornadoes...

I live on the coast of Florida for thirty years and survived through all those hurricanes but nothing compared to the tornado I was caught in the middle of Iowa. There are no safe places. And those insurance companies never paid us for any storm damage ever.....that's really why they show such a huge profit.

[Maddy McCall]

18. Yes. Are they going to target "tornado alley," too?

If a town has been hit by a tornado, are they going to write that town's population off of their list?

Taken to it's (il)logical extreme, this policy is wretched. The grace of god can only take you so far.

:thumbsup:

[Tesha]

42. Probably. Insurance companies don't exist to write coverage that's...

Probably. Insurance companies don't exist to write coverage
that's actuarily unsound: When the aggregate premiums collected
in a given area don't cover their loses + expected profits, you
can bet they'll be out of there 'fast as the state regulators
will let them go.

Tesha

[lastliberalintexas]

17. The federal government does just that

At least in some cases. I remember a local case a few years ago where people who live in a certain part of Liberty County, TX were given that very option- rebuild elsewhere with this money or you're on your own in the future. I don't know if they still do that (this was under Clinton) or if so, how widespread the policy is.

[pitohui]

29. 70 percent of usa population lives in flood plains

you need to get some facts and some education before you spout off

a country's wealth comes from its coasts and its waterways, no population on the coasts, no wealth

simple as that

it is not sensible to hate the people who put the gas in your car or the food and coffee in your stomach, it is irrational, a dog has more honesty

if you eat food shipped through the port of new orleans, if you drink coffee, if you put gas in your car, you personally benefit every day from people living here

shame on you for your lack of gratitude, it is v. unattractive

[Malikshah]

38. Thank you!! As someone who lives in SFlorida ina "flood zone"

...around 8 miles inland...yet still part of the "coast" to some....

Now...for those speculating on condo units in Ft. Lauderdale.... no. sympathy. what. so. ever.

[Tesha]

43. You routinely insult people who disagree with you about NOLA.

> spout off
> it is irrational, a dog has more honesty
> shame on you for your lack of gratitude, it is v. unattractive.

You routinely insult people who disagree with you about NOLA;
*THAT* is unattractive.

If New Orleans ceases to exist, its functions will be performed
elsewhere (although the costs of those functions may rise). But
when the seas rise, it may well be that huge swaths of the former
South may become available for the building of new ports (including
New New Orleans).

Tesha

[AirmensMom]

34. Homeowners insurance doesn't cover flooding.

That's a totally separate flood policy. The insurance companies carrying homeowners policies are afraid of wind storm damage, not flooding.

[yankeeinlouisiana]

39. I don't live in a flood prone area.

I'm slightly above sea level. The levees broke, I got 4' of water.

[Horse with no Name]

5. As far as I am concerned

Any insurer that drops these policies for ANY reason without cause (non-payment of premium, etc) should have to refund EVERY cent that the person paid in premiums with the market rate of interest.
This is total crap.
I don't have a problem with them not accepting new policies but they shouldn't be allowed to look at their portfolio and dump the ones that may in fact use their policy.

[Tesha]

44. That's nonsense. Just as you can change insurers, they can change...

> Any insurer that drops these policies for ANY reason
> without cause (non-payment of premium, etc) should have
> to refund EVERY cent that the person paid in premiums
> with the market rate of interest.

That's nonsense. Just as you can change insurers, they can
change whom they chose to insure. They don't become your
indentured servant the moment they first issue you a policy.

And if the risks associated with insuring you change, they
have every right to decide they'd prefer not to have your
business.

Try this thought experiment: For years, a person has been
buying auto insurance from, say the Gecko Assurance Company.
They've also been driving drunk for years, but have avoided
getting caught; in fact, they got the "good driver discount"
all those years. Well, until they crashed into a school bus
in autumn of 2005, killing several kids. Now Gecko doesn't
want to renew their policy.

Should Gecko be obliged to renew the policy? At what rate?

Tesha

[Roland99]

6. Their investments started paying off due to the market's artificial rise

[Coastie for Truth]

9. Insurance industry Business Model

HIGH LEVEL SUMMARY

They take your money, invest it, make a profit on their investment, and when the "covered event" happens they refuse to pay.

COROLLARY 1

If you sue them they scream "frivolous law suits" and run to the government for "tort reform"

COROLLARY 2

If too many people sue them and win they run to the government for a bail out. For example, flood insurance and earthquake insurance.

[nashville_brook]

26. capital must be regulated -- it's antisocial

[ChairmanAgnostic]

36. I bow to your accurate analysis and description.

I put myself thru lawskule on their backs, and boy, when I looked in the mirror, I did not like what I saw back then.

[OneBlueSky]

11. if they won't provide home coverage in a state . . .

then prohibit them from doing ANY business in that state . . .

[LibDemAlways]

12. I worked part-time for a small CA based

homeowners ins. co for a year, and was appalled by what they got away with. They wouldn't insure a home anywhere near a brush area. No homes built before 1970. No households with any of several breeds of dogs - and I'm not talking just pitbulls but dogs like akitas and dalmations! No homeowners who worked in the entertainment industry. They checked the credit score of all applicants and sent out independent inspectors to take photos of properties. These inspectors entered yards uninvited and without permission. If a homeowner managed to pass muster and get the insurance he had better never file a claim because the claims department's mission was to deny everything. Filing a claim was the surest, swiftest way to a non-renewal notice. What a racket.

[SoCalDem]

22. Our sweet Labradors prevented us from changing companies

They had a "weight" limit for dogs.. The poodle (small) was more likely to bite, but for some reason they thought that a big dog was a bigger danger to their wallet.. Our dogs were not "free-range" dogs but that didn;t matter to them.. The guy said. "ditch the hounds and we've got a deal" :grr:..Of course it was a "no Deal" for us..

My mother had a policy cancelled once because she filed "too many claims".. a tornado did some minor damage, and we had a pipe burst in the basement.. 2 claims in maybe 20 years worth of premiums...

[Hekate]

37. After the Northridge quake it became obvious Calif was gonna be screwed...

... Insurance companies aren't just risk-averse, they are refusing to do the job they promise to do. They rake in the dough but they sure don't want to give any of it back.

Hekate

[lastliberalintexas]

13. Even the ones still writing policies have severely limited

the coverage provided. I was appalled when we had to renew this past March. If this area gets hit with another hurricane this year, there will be many people who think they have insurance who will find out otherwise. :(


:hi: Maddy. I hope your family in this area is doing well.

[Maddy McCall]

16. Hi, lastliberal.

We are doing fine...I walked outside around our property this morning. It's kinda crazy lookin'!

The hickories are lying on their sides, yet some of their root ball is still in the earth, which means that their leaves are green! Can you imagine--it's a sideways forest. :D

:hi:

[lastliberalintexas]

19. Isn't that crazy?

We've seen that as well, along with some pine trees that snapped about 15 feet from the ground and fell over, but still have fresh pine straw on them because they are still living!

I'm glad y'all are doing well. It's scary to think that the season is right around the corner already, and there are so many people all along the Gulf Coast and in Florida who are still out of their homes from last year! And the temps in the Gulf are downright scary. :(

I certainly don't wish it on anyone else, but I'd hate to see the Gulf Coast get hit again.

[Maddy McCall]

20. I'm afraid we can't avoid it...

It's going to happen. :(

When evacuation orders are given to merh, I'm going to demand that she hitch her FEMAnsion to her jeep and come park it in my yard, FEMA rules be damned.

I'm not on the Mississippi coast--I'm about 60 miles north of Lake Ponchartrain (closer to NOLA than to Biloxi) and we did get 100+ mph winds--but she'd be better here than sitting on the back bay.

:scared:

[fshrink]

21. You can still get

a policy for flood damage in southern Arizona. But, wait, no, this would be an "act of god" and thus not covered.

[nashville_brook]

25. flood insurance is a federal program --

on the beach in florida, you can't the general insurance that protects the bank note.

[electron_blue]

23. Somebody sure believes in Global Warming

I read an article last year that the normally very-Republican industry of insurance parted ways with Bush in believing that Global Warming was real. They said something like "given the evidence and catastrophic losses the industry has suffered in recent years, it is to our advantage to believe the predictions of the scientists over the Bush administration."

[nashville_brook]

24. i want to be the first to nominate this and here's why

a couple of disturbing things are going to result from this.

first of all -- it's going to KILL the real estate market. glad i got out when i did. i speak from experience on this -- it a BIG FUCKING DEAL.

secondly -- pay attention to the word UNDERCAPITALIZED and think about what that means to new orleans ex-pats. there's a lot of ways to lose your home.

third (and the most global) -- read between the lines regarding GLOBAL WARMING here. if you haven't lived on the coast in a while, you might not be aware of how fragile it is right now, particularly in florida. at least where i'm from, it's freakish for there to be a hole in the line of condos on the oceanfront. massive, tony condos -- all within mere FEET of the edge of the dune. every year there's less beach. i'm not saying the water is rising, per se -- i'm saying things are changing and our financial experts are smart enough to flee. take that FWIW.

[pitohui]

28. the atlantic coast is more vulnerable than people think

a quick trip to new york and new jersey really shocks, you have million dollar homes right on the water, in new jersey even right out on barrier islands

in louisiana, we have one inhabited barrier island, grand isle, with small homes worth maybe $40,000 on average

i don't know how anyone could afford to insure manhattan, long island, or coastal new jersey, the value of the property that would be destroyed would be greater than katrina by orders of magnitude

[lynne]

30. It's not just hurricane's -

- that cause insurance companies to change their practice. Several years of bad hail losses - combined with contractor hail damage fraud - caused several companies to quit and/or restrict writing home insurance in Virginia about 3 years ago.

Some atlantic coastal homes cannot get wind coverage included in their home policies. In some states a "Wind Pool" - similar to auto assigned risk - is in operation for those on the coast who need wind coverage but cannot find it elsewhere.

The companies can choose to pull a type of coverage out of a state and non-renew policyholders giving about 60 days notice prior to expiration. They cannot cancel mid-term just because they have changed their underwriting guidelines providing premiums has been paid.

Bear in mind that companies cannot arbitrarily increase their rates without permission of the Bureau of Insurance in the state in which they are doing business. They must show evidence of premiums paid vs. losses and expenses for that particular line of coverage to justify a rate increase and receive permission from the bureau for an adjusted rate/underwriting filing.

[AuntiBush]

31. Before You Buy that Home Near a Watershed or Front

Call around and ask... best to find a small insurance broker who calls around. Better to be safe then sorry before buying a waterfront home or one near water these days.

[Canuckistanian]

32. Insurance companies may be thieves, but they're not stupid

I heard that insurance companies were the first industry to fund studies, predict and plan for Global Warming. To them, it's a reality.

And they know what's coming.

[carolinalady]

33. Yep big notice in our weekly Island Gazette that came out today.

Fema redrew flood plains, need to call this number to see if your property is affected. We rent and are waiting to see if monthly rent will go up.

[Lisa]

45. thanks for posting, Maddy

I forwarded the articles to my boss, who researches climate change impacts and adaptations (including legal/administrative responses). (He just returned from a stint with the UN environment people.) He was VERY interested -- so kudos for finding and sharing a timely news item!