Facts about Coastal Alabama s Homeowners Insurance Crisis and The Solution. It s time to FIX this Crisis -- Not Dabble at it (Based on the hhii Best-Case Scenario)
Let s get a couple important facts out of the way, first.
Despite the increase in natural disasters, the U.S. insurance industry was the richest it has ever been in March 2011. ($ Billions) US Policyholder Surplus: 1975 2011* Surplus as of 6/30/11 was a near-record $559.1 down 1% from the record $564.7B as of 3/31/11, but up 27.9% ($122B) from the crisis trough of $437.1B at 3/31/09. Prior peak was $521.8 as of 9/30/07. Surplus as of 6/30/11 was 7.1% above 2007 peak. Surplus is a measure of underwriting capacity. It is analogous to Owners Equity or Net Worth in non-insurance organizations Source: A.M. Best, ISO, Insurance Information Institute. * As of 6/30/11. Dr. Robert Hartwig slide
They re nowhere near going broke. Another fact to get behind us...
156 Companies write Homeowners Insurance in Alabama. A lack of competition is not the problem Who are Plan Members? All licensed insurers writing P&C coverage insurance in Alabama Current Members (Plan year 2011) 485 Companies 329 Exempt from participation 306 write no P & C in AL 156 Companies are subject to assessments ranging from.0001% up to 19.5546% 69 Companies report voluntary written premium in eligible areas 23 voluntarily write sufficient coastal property to be exempt from AIUA assessments 11/21/2011 Alabama Insurance Underwri6ng Associa6on
If Money s not the Problem & And Competition s not the problem?... What is The Problem?
The Problem: An Alabama Department of Insurance (DOI) Lack of Information & Bias......that leads to unfair price Discrimination Against the Coastal Counties.
In 2006 When this Crisis Started the coastal counties Paid the State Average. The Alabama Average today is about $850 a year
Alabama Coastal Premiums today Are 250 to 325% Higher than other Parts of the State. ALABAMA HOMEOWNERS RATES Average Premium Relativity (with Wind) by City for a $200,000 Home: Birmingham (35242) = 100% Huntsville (35801) = 110% Montgomery (36117) = 111% Tuscaloosa (35401) = 120% Camden (36726) = 135% Gadsden (35901) = 136% Dothan (36301) = 139% Saraland (36571) = 263% Mobile (36608) = 294% Bay Minette (36507) = 300% Fairhope (36532) = 311% Gulf Shores (36542) = 328%
In 2006 (the time of abundant news about Global Warming) The DOI decided Alabama s coastal counties would be wildly more expensive to repair than the rest of the state. Warmer oceans would make hurricanes more frequent and damaging. The Alabama DOI allowed Insurance Companies to Introduce Wildly Experimental Hurricane Catastrophe Models
Coastal Insurance Prices skyrocketed 10,000s of Mobile and Baldwin Families were Dumped 10,000s of Coastal Families are Now Functionally Uninsured or have simply Dropped Their insurance Altogether. Some have Lost their Homes. $200 million premiums in excess of the State Average is siphoned out of our Two Counties each year. That s a lot of Jobs.
Was the DOI right?? Are REALLY Coastal Counties 300% more Expensive To Repair Than the Rest of the State?
In 2006 The Wildly Experimental Hurricane Catastrophe Models predicted $60 billion in US hurricane losses over the forthcoming 5 years (from 2006 2010)
Karen Clark the Inventor of the Models found that the actual losses were only $15 Billion. (The models overpredicted losses by $45 billion.)
Karen, - - The Inventor of the Hurricane Catastrophe Models - - Has Repudiated her Inven6on, And proposed a New Way.
In 2011 RMS A company that Predicted $67 Billion in Losses Dramatically Revised its Hurricane Catastrophe Model
Their colored map shows the effects of their revisions. The modeler Overstated the costs in Mobile & Baldwin counties 50%. & Understated the costs inland by as much as 400%.
Is the Coast REALLY More Expensive to Repair than Inland? If not... then Coastal Alabama Should pay the State Average Like it always Paid In the Past $850 a year
There s more...
As RMS figured out, When hurricanes strike Alabama s coastal counties, they don t stop at the county line. Hurricanes do significant inland damage, too.
FEMA declared 65 of Alabama s 67 counties Disasters after Hurricane Ivan Designated Counties for Alabama Hurricane Ivan Alabama s Disaster Coun6es aaer Disaster Summary For FEMA-1549-DR, Alabama Declaration Date: September 15, 2004 Incident Type: Hurricane Ivan Hurricane Ivan Incident Period: September 13, 2004 through September 30, 2004 Individual Assistance (Assistance to individuals and households): Autauga, Baldwin, Barbour, Bibb, Blount, Bullock, Butler, Calhoun, Chambers, Chilton, Choctaw, Clarke, Clay, Coffee, Colbert, Coosa, Conecuh, Covington, Crenshaw, Cullman, Dale, Dallas, DeKalb, Elmore, Escambia, Etowah, Fayebe, Franklin, Geneva, Greene, Public Assistance (Assistance to State and local governments for the repair or replacement of disaster- damaged public facili6es): Autauga, Baldwin, Bibb, Bullock, Butler, Calhoun, Cherokee, Chilton, Choctaw, Clarke, Cleburne, Coffee, Colbert, Conecuh, Coosa, Covington, Crenshaw, Cullman, Dale, Dallas, Dekalb, Elmore, Escambia, Franklin, Geneva, Greene, Hale, Houston, Jackson, Jefferson, Lamar, Lawrence, Lee, Lowndes, Marengo, Marion, Marshall, Mobile, Monroe, Montgomery, Perry, Pickens, Pike, Shelby, Sumter, Talladega, Tallapoosa, Tuscaloosa, Washington, Wilcox, and Winston Coun6es for assistance for debris removal and emergency protec6ve measures, including direct Federal assistance, at 100 percent Federal funding of the total eligible costs for a period of up to 72 hours. Hale, Henry, Houston, Jackson, Jefferson, Lamar, Lauderdale, Lawrence, Lee, Limestone, Lowndes, Macon, Madison, Marengo, Marshall, Marion, Mobile, Monroe, Montgomery, Morgan, Perry, Pickens, Pike, Randolph, Russell, Shelby, St. Clair, Sumter, Talladega, Tallapoosa, Tuscaloosa, Walker, Washington, Wilcox, and Winston Coun6es. Hazard Mi6ga6on Grant Program (Assistance to State and local governments for ac6ons taken to prevent or reduce long term risk to life and property from natural hazards): All coun6es are eligible to apply for assistance under the Hazard Mi6ga6on Grant Program. FEMA Disaster Summary For FEMA-1549-DR, Alabama Two-thirds of all claims after Ivan were made north of Mobile and Baldwin counties, according to a source cultivated by Alabama State Senator Trip Pittman.
Some hurricanes do more damage inland than on the coast. The eye of Hurricane Katrina, skipped Alabama s coastal counties, curved from the Mississippi Coast back east to clip the northwestern corner of Alabama, the only part of the state that the eye touched.
Your tax money being spent for Katrina Relief in Tuscaloosa.
Mid- day Aug 28 Began to Dissipate 8:30am Aug 26 Landfall in LA 8:50am Aug 24 Landfall in FL Hurricane Andrew behaved in a similar way
Hurricane data alone suggests inland Alabama incurs more wind losses than the models predict. And they just deal with Hurricanes alone. What about Other Kinds Of wind-and-hail events?
Alabama suffered Five Catastrophic Wind or Hail events in 2011 not just one. Four others in addition to the April 27 Tragedy. 2011 Catastrophic Homeowners* Claim Activity in Alabama, by Event** Date Perils Avg. Pmt $ Total $ Pd. # Claims HO $ % HO # % Event Total 2011:Q1 Total Event Total Event Total It suffered significant wind damages in 2009, Too. Event Total 2011:Q2 Total Event Total 2011:Q3 Total 2011 YTD Totals **Through Dec, 7, 2011. Source: PCS Division of ISO. *Includes all categories of dwelling policies, such as home, condo and renters policies
Tornado Tracks by Enhanced Fujita (EF) Scale, January July 2011 Alabama averaged 59 tornadoes per year from 2000-2010, but 128 from Jan. July 2011, the highest in the country Alabama averaged 59 tornadoes each year from 2000-2010... AL had the highest concentration of EF-3, 4 and 5 storms in 2011 Source: NOAA at: http://www.spc.noaa.gov/wcm/2011-jan-jul.png 12/01/09-9pm eslide P6466 The Financial Crisis and the Future of the P/C
Alabama averaged 1 Hurricane every 11 years during the 20 th Century 59 (Tornadoes a Year) X 11 (Years between each Hurricane) = 649 Tornadoes per Hurricane
State? Are the Coastal Counties REALLY More expensive to Repair Than the rest of the
Severe Weather Reports in Alabama, January 1 December 5, 2011 In 2011 alone, In Alabama alone, There were There were 1,288 severe weather reports in AL through Dec. 5 217 severe Hail reports 170 Tornadoes 901 Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# Other severe wind reports
Are the Coastal Counties REALLY More expensive? How do we answer that question?
Simple Compare the costs to repair the coastal counties with the cost to repair inland counties. So. Why not do this?
Because the Alabama Department of Insurance does not collect data on a county-by-county basis.
Huh? The DOI suddenly allows Companies to charge Coastal Counties 300% more than the rest of the State, And... It does Not Have any of its own supportive, county-by-county historical data justifying this Unquestioning use of wildly experimental catastrophe models and huge change in price?
Is a Pattern Emerging?
The DOI allows companies to charge Coastal Counties more for... FIRE Insurance, Even though they know there is no actuarial justification for the difference.
Alabama Law requires that the DOI insure fair pricing practices. ALABAMA RATE STATUTES Alabama statute says that rates must not be: * Excessive * Inadequate * Unfairly discriminatory
It s time to require that the DOI follow the law It must quit Guessing That the Coastal Counties are more expensive than the rest of the state. It must quit Discriminating against the Coastal Counties. It s time that the DOI treat all Alabamians fairly. Like the law requires.
What s needed is the The Clarity Bill. It allows us to do the math. It requires the DOI to collect, Aggregate, and publish on- line, by zip code and peril: a) dollar amount of claims b) dollar amount of premiums c) total number of Policies And d) to use this historical data as a guide when determining fair premiums statewide.
With this data we can compare actual losses around the state. It will serve as a plumb line to check the wildly experimental models.
Are we really more expensive than the rest of the state... Let s quit guessing And Do the Math
What you can do... Before the Coastal Counties can speak persuasively to the rest of the state, The Coastal Population and Leaders must be united behind the Solutions. Presently our leaders from elected officials, to civic club officers, to chambers, to pastors, to media are all over the map regarding solutions. This must change. YOU have to require it.
What you can do... Get on the HHII email list and stay informed. Pay close attention to proposed solutions and decide if your legislators and state officials are proposing something that fixes the crisis... Or only dabbling at it Repudiate the Governor s Affordable Homeowners Insurance Commission, if it does not deliver a solution. Make your repuidation loud and clear. Occasionally come to hhii meetings in your area.
What else you can do... -- Especially come to public meetings when HHII brings in people who have the power to make change. -- Get on a committee. Sign up tonight.
www.hhii.us YouTube hhii - TV