Mississippi Insurance Chief Chaney Reports Progress in Rebuilding Markets

One year after he was elected, Mississippi Insurance Commissioner Mike Chaney says his state has made progress in rebuilding its insurance markets that were ruined by the 2005 hurricanes.

Mississippi has done this by modernizing its wind pool, emphasizing building codes, protecting consumers from unfair rate hikes and encouraging rather than demonizing insurance carriers, according to the former legislator-turned-regulator.

In a recent interview with Insurance Journal’s Kenneth St. Onge at the National Association of Insurance Commissioners annual meeting, Chaney discussed the challenges he has been facing in Mississippi and what’s he is doing to lure carriers to the state. The video interview is available on Insurance Journal TV.

Chaney recalled what conditions were like when he took over on Jan. 2, 2008.

“The issue, for us, was finding property and casualty insurance that was affordable, getting claims paid that existed from Katrina, and trying to stabilize the market and put some predictability back into it. I took over at a time when lawsuits were very prevalent in the tort market on the Gulf Coast, when insurance companies were being put down as being very, very bad corporate citizens,” he said.

He said that as commissioner, he must work to make sure there is a viable market where insurance companies can make a profit. “[B]ut yet, if you make an error, you err on the side of the consumer. The consumer has to be protected from exorbitant rates.”

At the same time, insurers need to be told they are welcome in the state and can make a profit in Mississippi, according to the regulator.

“What we have been doing is recruiting new companies to come to the state. We have kind of a dog-and-pony show. It’s a very profitable state to write business in, and we’ve been successful,” Chaney told Insurance Journal.

He said he’s signed up more than 40 new companies in his first year as commissioner, with help from former Commissioner George Dale and contacts he had when in the state legislature.

Chaney is proud of his state’s approach to modernizing its wind pool.

“I was in the state legislature when we modernized the wind-pool bills and gave them the ability to do cat bonds if they were needed. We shored up the plan and made it solvent, actuarially sound, contrary to what was done in other various states. I don’t want to pick on any state, but we didn’t want to go the route that Florida had gone, or go the route that Louisiana had headed towards. So we took our own ship and fixed it. We’re running very well,” he said.

He said the pool went from needing a 56 percent increase in premiums on the Gulf Coast to offering 11 percent average reductions, with some reductions as high as 22 percent.

“So we’ve done some things right. When you, as the commissioner, can announce a rate reduction in property and casualty, buddy, you’ve done something. So we think we’re doing the right thing,” Chaney said.

He said the pool is doing so well there could soon be another reduction in rates.

The insurance rebuilding effort has also involved taking building code enforcement seriously, including educating local politicians and mayors about the importance of uniform codes and enforcement. The state now has mandatory building codes in key coastal counties.

“I’m enforcing building codes and I’m saying to folks, ‘If you want wind pool insurance and the state-run wind pool, you have to have standardized building code.'”

Chaney has also made sure the insurance industry is aware of the state’s progress. He has an education package he uses to show insurance carriers what the state is doing in enforcing building codes.

Even more important than the educational efforts are the premium discounts he has negotiated from insurers for homeowners who build or retrofit their structures to comply with the new building codes. He said at least three major insurers would announce before the end of the year that they will give discounts up to 35 percent for building back or retrofitting existing homes to building codes.

“They’re sliding scales. If you put straps down, you may get 5 percent. If you fix your roof sheathing, you may get another 5 percent. All the things you do — impact windows, shutters on the windows — it builds up. Then, in addition to that, if you put all your eggs in one basket with that company, where you may have your automobile in addition to all of the other things that you insure, then you can stack those discounts and get as much as 50 percent discount on your homeowner’s insurance,” he said.

While Chaney thinks the discounts will have beneficial impact, he is convinced that rebuilding Mississippi’ markets is a multi-faceted challenge.

“[Y]ou don’t have just one silver bullet to try to solve the problem. It takes a lot of people working together. And to entice those companies to come in and write property and casualty insurance, you really have to have more than one thing going at one time.”