Miss. recovery impeded by business insurance hikes
Hurricane Katrina only damaged the eaves of Morris Strickland’s shopping center a few miles from the Ocean Springs, Mississippi beach. The damage cost less than $2,000, and stores leasing space in Eagle Plaza quickly reopened.
Yet even a relatively small claim didn’t keep Strickland’s $8,000 annual insurance premium from catapulting to $31,000 this fall.
“I was just staggered,” he said. “As more small businesses are struggling to get open and they get their insurance increases, they are going to say, ‘I can’t open.'”
A 268 percent hike in commercial insurance rates from the state’s high-risk insurance pool is one of the hurdles slowing recovery for small businesses on the Gulf Coast. Gov. Haley Barbour has asked the U.S. Department of Housing and Urban Development for more aid to offset the massive rate hike. In the summer, the state received $50 million to lower a homeowners hike in the same pool from 397 percent to 90 percent.
Keeping insurance rates reasonable in the Mississippi Windstorm Underwriters Association — known as the wind pool — will be a challenge for Barbour and state legislators. Any tweaks to the pool that covers wind and hail damage in high-risk areas could reverberate statewide.
More people have been forced to buy insurance from the pool because private firms will not write contracts on the coast. So far, both State Farm and Allstate have said they will limit how many policies are issued within a few miles of the water.
A larger pool worries insurers writing in central or north Mississippi. When damages paid by the pool exceed premiums collected, the private is assessed. After Katrina, private firms paid more than $500 million to the pool.
“A company in Tupelo might limit its writings because the more policies it has, the bigger the assessment,” Insurance Commissioner George Dale said.
Dale’s office is working with the Gulf Coast Business Council to explore ways to stabilize the wind pool. The business council has recommended offering tax incentives for insurers to cover wind and hail damage in high-risk areas. “We’ve got to solve this problem,” said Ronald Peresich, a co-founder of the council. “Right now, it’s holding back our ability to fully recover after the storm.”
Some people must pay the 268 percent hike on their business and the 90 percent increase on their home insurance. “They catch it on both ends,” Peresich said.
Another suggestion is to allow insurance companies to cover losses from all of the customers over a period of years. Utility companies are allowed to recoup damages this way. The council also wants lawmakers to put money into the program, perhaps using a portion of the sales or gaming tax.
Also, the council proposed making surplus insurers participate in the pool.
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