Mississippi Commissioner Offers Alabama Advice on Coastal Insurance
The keys to holding down insurance premiums on the Alabama coast are strong enforcement of building codes, proper land use and mitigating homes against future disasters, Mississippi Insurance Commissioner Mike Chaney told an Alabama House of Representatives subcommittee this week.
Chaney appeared before the House Insurance Regulations Subcommittee at the request of Alabama Insurance Commissioner Jim Ridling, who asked Chaney to give advice and direction to Alabama lawmakers stemming from Mississippi’s experiences in the aftermath of Hurricane Katrina, which devastated the Mississippi coast in August, 2005.
“This is not a simple issue,” Chaney said. “It’s an issue that you’ve got to address with great caution.”
Chaney said it is important to encourage competition between private insurers, enforce strong building codes and limit the number of people using the state-backed wind insurance pool.
Chaney, who helped write Mississippi’s wind pool regulations as a state senator, also cautioned against relying on state subsidies to bring down coastal premiums. The Mississippi Windstorm Underwriting Association, the insurer of last resort for coastal properties, has used state subsidies to lower premiums after Hurricane Katrina, Chaney told Alabama legislators. But Chaney cautioned that if state subsidies continue the wind pool could end up offering a better deal to policyholders than private insurers. This could attract more policies and more risk, and require more subsidies from the state, Chaney said.
“Continued subsidies are not economically feasible,” Chaney told the Alabama legislators.
Chaney also said he supports premium discounts for home mitigation, but believes they should be voluntary and not mandated by state law. Recent legislation enacted in Alabama does not set an exact discount amount although insurance companies in Mississippi may grant 30 percent or more for homes mitigated to withstand up to Category III hurricanes. His state’s wind pool currently offers up to 30 percent discounts for mitigated homes.
Chaney also stressed cooperation between coastal states. “While coastlines vulnerable to hurricanes from Texas to Maine may differ in size, the problems created are uniform, the foremost one being skyrocketing premium rates,” Chaney said. “If coastal states work together to present workable, uniform solutions such as mitigation discounts and strong building codes, we can help drive premium rates down and see to it that our coastal consumers are protected in the event of catastrophic storms.”