October 6, 2008

Coastal Carolina Residents-Do You Pay Your "Fair Share" of Homeowner's Insurance?

The Associated Press

North Carolina lawmakers examining whether the insurance industry is prepared financially to handle a monster hurricane and billions of dollars in claims disagreed Tuesday whether coastal residents already pay a fair share of premiums.

The legislators spoke during the first meeting of a study committee that could recommend changes to the full General Assembly next year.

The insurance industry is worried a state-sanctioned program for affordable coastal insurance doesn't have enough money to pay for a 100-year storm that one official said could rack up $3.3 billion in insured losses in 18 coastal counties.

At the same time, more insurers are wary of offering their own coverage at or near the beach because they say the regular rate they can offer isn't profitable.

"We're going into this with an open mind but I think we have a pretty severe problem," said Rep. Hugh Holliman, D-Davidson, co-chairman of the committee, adding that lawmakers must make "sure our insurers are still there and they don't pull out on us and (make) sure our homeowners are covered."

The committee will focus on the North Carolina Insurance Underwriting Association, usually called the "Beach Plan."

First created nearly 40 years ago to provide wind damage insurance to homeowners on North Carolina's barrier islands who couldn't obtain coverage on the open market, the program's coverage has expanded over the years to now cover $72 billion in assets.

Lee Dunn, the plan's assistant general manager, told the committee the program is prepared to meet $2.4 billion in claims from the up to 170,000 coastal properties it covers, using $500 million in cash reserves as well as reinsurance.

But it also would require insurance companies to be charged hundreds of millions of dollars in assessments, which often get passed along to policyholders outside of the 18-county area. More assessments would be necessary for larger storms, which worries the industry.

Farmers Insurance, the ninth largest insurer in North Carolina, said in August it was pulling out of the homeowners' market because of the potential assessments.

The committee could recommend that all coastal premiums be raised to encourage companies to write more private homeowners' and wind-damage insurance policies for consumers and reduce pressure on the Beach Plan.

The Beach Plan charges 15 percent above what regular insurers offer, so higher premiums would provide an incentive for traditional insurers to write policies while providing more revenues to the Beach Plan.

Rate increases require approval by the state insurance commissioner.

But Rep. Bonner Stiller, D-Brunswick, said rates already are too high and blamed the industry for pulling out of coastal markets while continuing to write policies inland even though hurricanes cause damage there too.

Stiller recalled how his father was quoted $621 for regular homeowners' insurance but $2,432 for the additional hurricane coverage.

The coastal premiums are "just crushing folks that have been long-term residents," he said.
But data presented by the Beach Plan show that North Carolina's hurricane insurance premium rates are among the lowest when compared to other Southeastern states with similar plans.

"I don't have a lot of sympathy for the guy with the million-dollar home who has to pay a little more insurance," said Rep. Bruce Goforth, D-Buncombe.

The committee also is likely to examine whether improving building codes or encouraging preparedness can minimize damage when a big storm hits the coast.

(The committee will make recommendations by early next year. [From WNCT in Jacksonville])

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