Maryland Fears Mobile Home Values Will Shrink as Insurance Disappears

Owners of mobile and manufactured homes in Maryland’s coastal communities and their insurance agents are having difficulty finding insurance coverage as carriers pull away from the market.

The problem is squeezing owners who want to sell their mobile or manufactured homes. They can’t sell to buyers who need home insurance to satisfy lenders, so their pool of potential buyers is limited to those able to pay cash. Local officials are worried that this, in turn, is reducing property values.

“I’m concerned that neighborhoods in Ocean City such as Montego Bay, White Park and Warren’s Park will experience significant decrease in property valuations if insurance cannot be acquired,” said Delegate Wayne Hartman, who serves a district encompassing Wicomico and Worcester counties.

Ocean City Mayor Rick Meehan is worried that the trend could potentially impact more than 1,000 properties. He asked how it could be happening:

“How is it that a recreational vehicle which travels up and down the highway and could literally be parked in the driveway of a manufactured home in Ocean City has no problem getting insurance but take the wheels off that same vehicle and put it on a concrete foundation and now it can’t be insured?”

Meehan maintains that “folks that can least afford to be without reasonably priced homeowners insurance are the ones that are being penalized.”

Public Hearing

The plight of the manufactured home owners is enough of a concern that the Maryland Insurance Administration (MIA) held an online meeting on October 23 to gather feedback from city officials, legislators, agents, carriers, residual market managers, consumers and regulators. That is where Hartman and Meehan aired their concerns.

Acting Insurance Commissioner Marie Grant said the MIA’s preliminary research shows that not only are many standard market carriers not providing coverage for these homes in Worcester County and other coastal locations but also surplus lines carriers are beginning to limit their coverage, for example, by excluding wind coverage or only writing homes that are less than 20 or 25 years old.

The most affected local manufactured home communities include Montego Bay in Ocean City and White Horse Park and Assateague Pointe in Worcester County.

Claire Pantaloni, vice president for agent advocacy with the Insurance Agents and Brokers Association, said her group did a quick survey of its members that found insurance is “mostly unavailable, not completely, but most of the restrictions are on the age of the mobile homes and those are the ones that cannot find any coverage.”

Insurance Agents

Several local insurance agents confirmed there are essentially no insurance markets for these homes locally, and the problem is spreading.

“If they’re on a canal, forget it. That’s not happening. And there’s a lot of communities that are on canals that we are really struggling as producers to get coverage for from any of the carriers. We just need help,” said Colleen Nichols with Landmark Insurance in Ocean City. She pleaded for coverage for these people who “truly are buying what could be their last home.”

Nichols was asked if it is not only standard market carriers but also surplus lines carries pulling out. “Absolutely, they’re pulling out. ” She said there is no coverage at all for manufactured homes that are more than 25 years old.

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Emily Nock, president of Nock Insurance, an independent insurance agency also writing in Ocean City, said it’s become “impossible” to write mobile homes — and she fears it’s a sign of what’s to come.

“I think it’s the first sign of a growing problem, not just with mobile homes, but it’s going to be with stick-built homes eventually in the future,” Nock warned. She said that about five carriers in the last two years have non-renewed all property policies in coastal areas and agreed that surplus lines carriers are now getting stricter with older homes in Ocean City.

Greg Cathell from Cathell Insurance in Mission City, said his agency lost 100 clients when one carrier left Worcester County. “It is extremely difficult. There are no companies that we can quote,” he said.

‘Common Misconception’

Leaders from Ocean City maintained that in restricting coverage the insurance industry is ignoring how much the city has done to mitigate against extreme weather risk with better building codes and other measures and that it has had far fewer flood insurance claims than other communities.

Meehan and Ocean City Manager Terry McGean took issue with the “common misconception” that their community is too risky to insure. McGean recalled that when he first came to Ocean City as a city engineer in 1990, he was told many times that In 10 years, “Ocean City will be gone,” eroded away or wiped out by a hurricane. “Thirty-four years later, we are still here and stronger than ever,” McGean said, maintaining that the reason the city has been resilient is that “well before sea level rise and climate change became household words, we understood the risks of building in our environment.”

McGean noted that in the 1970s, Ocean City adopted a series of strict building codes and zoning restrictions to address both flooding and high wind hazard. These included ocean front setbacks, minimum building elevations, foundation standards, and structural requirements— all of which he said are well above the minimum set by the Federal Emergency Management Agency (FEMA).

Meehan said Ocean City has completed a major beach replenishment project, a dune system, and a seawall – mitigation efforts effective enough that FEMA does not even require flood insurance for homes on the coast.

McGean maintained the efforts have paid off, at least in terms of flood claims. Since Ocean City’s entrance into the National Flood Insurance Program in 1971, FEMA has paid about $10 million in claims on property insured for over $7 billion in Ocean City. He compared that to Anne Arundel County where FEMA has paid $46 million in claims for property with an insured value of just $1.5 billion.

“Ocean City homeowners, whether they have mobile or manufactured homes or a conventional stick-built home, should be able to get affordable homeowners insurance. Multinational companies should not deny coverage in Maryland based on events that occur in other states,” he argued.

Insurance agent Nock echoed McGean’s point regarding losses, pointing out that companies that write predominantly in Ocean City have her agency’s best loss ratios. “Simply put, we don’t have the claims that people think we’re going to have,” she said.

Where’s the JIA?

Just about every speaker wished the state’s property insurer of last resort, the Maryland Joint Insurance Association (JIA), could do more to help since the private standard and surplus lines markets are drying up.

But the JIA (known as the FAIR Plan in some states) does not offer a homeowners policy for mobile and manufactured homes. JIA representatives explained that the best the JIA can do is provide a dwelling policy. The problem is a DP-1 policy, as it is known, does not come with replacement cost coverage, which agents said many mortgage lenders require.

The JIA only writes 32 manufactured and mobile homes statewide. Maryland Economic Action estimates there are more than 36,000 such homes in the state. The Consumer Federation of America (CFA) has estimated that nationwide, 35% of mobile and manufactured homeowners lack insurance.

Delegate Hartman suggested that one reason the JIA is not much help is because it is using outdated building code information for Ocean City. He said the city years ago adopted the strict International Building Code, whereas JIA guidelines still ask for proof of compliance with a different code, the Southern Standard Building Code.

“It is likely that the current set of rules is hindering many property owners’ ability to obtain coverage here in Ocean City,” Hartman said. He said JIA officials have told him they’re willing to amend their rules.

JIA attorney Mark Stiller acknowledged that the organization is willing to change its forms to reference the correct building code but added that doing so might not make a difference. “I don’t know that it takes us from a position where we go from writing a dwelling fire policy to a homeowner’s policy,” he said.

Stiller said that residual markets in Delaware and Virginia provide the same dwelling fire policy as well. “I don’t think this is odd or different for a FAIR Plan to provide coverage in this manner,” Stiller added.

Market Solutions

When the time came to discuss solutions, IA&B’s Pantaloni asked if the JIA could identify any characteristics or risk mitigations that would allow it to take on certain manufactured homes under a homeowners policy form. As an example she cited that the home is permanently attached to a foundation. Or perhaps the home has hurricane roof straps.

MIA’s Joy Hatchette asked about the availability of a difference-in-conditions type of coverage to fill the gap between JIA’s Dwelling-1 actual cash value policy and the mortgage lender replacement cost requirement.

Others urged insurers to provide discounts to homeowners who take steps to mitigate risks.

Higher reinsurance costs were cited as the reason carriers are dropping mobile and manufactured homes. One caller, an insurance broker, maintained that unless there is a way for insurers to pass along their higher reinsurance costs to homeowners in their premium, they will not write the risks.

Marlene White, who works on housing issues as executive director of Maryland Economic Action, stressed that the climate is not getting any better for these low income homeowners given predictions of continued extreme weather events.

“Manufactured housing communities are really a last bastion of affordable housing. We know that if they cannot be insured, we’re going to see decreasing home values for those homeowners who’ve already been struggling and are low income,” White commented.

Commissioner Grant stressed that the issues and market dynamics discussed during the meeting are not unique to Ocean City but may exist across Maryland. “I think we have an immediate issue here and we also have a broader discussion for the longer term statewide,” the commissioner stated. She said the search for solutions has just begun.

Grant welcomed thoughts from insurance carriers listening on the webinar but no carriers spoke up, even though there were questions directed to them. “So I would encourage our carrier community to either reach out to us or to provide information as part of the record,” Grant said in closing the hearing.