Better Late Than Never

Alabama Gov. Robert Bentley has finally released the long-awaited report by a commission to study what to do about insurance availability and prices. Bentley first created the commission on April 6, 2011 – almost two years ago – to address only coastal insurance. Then on April 15 and again on April 27 of that same year, deadly tornadoes struck the state, prompting Bentley to expand the mission to take a look at insurance statewide. Its name became the Affordable Homeowners Insurance Commission. Bentley had first promised to address coastal insurance in his 2010 campaign.

Alabama is no stranger to disasters; it is one of the states with the most federal disaster declarations since 1953. In 2011 alone, insurers paid out more than $3 billion in catastrophe losses in the state.

What took so long to get a report? Some say the commission of nearly 30 members was too large and this made it difficult to reach consensus. Members examined past insurance reports, held five sessions to hear from citizens, and met with insurance, risk management and disaster mitigation experts.

Not all progress was put on hold while the commission held meetings, read reports and argued. The state legislature managed to take some action. In 2012, lawmakers passed not one, two or three but seven homeowners insurance bills.

One new law gives tax credits to insurers for writing policies in Alabama’s coastal counties. Another allows homeowners to create catastrophe savings accounts that they can use to cover high deductibles. Another sets forth a “homeowner’s bill of rights” to help consumers better understand policies.

Another new law requires insurers to send the state data about policies written, premiums collected and losses due to claims, a move designed to provide more transparency about rates. Another law allows Alabama-based insurance companies to make new out-of-state investments. Other new laws involve fraud and roofing contracts.

The new commission report offers 13 recommendations that include finding ways to reduce the residual market population, encouraging high-deductible policies, and looking into developing a multi-state compact to spread the coastal risk.

One of the more intriguing recommendations calls for the creation of the Alabama Center for Insurance Information and Research, an independent center that would pursue “innovative approaches to solving problems associated with insurance issues” including engineering, finance, risk management, insurance, building codes, inspections, and communication. Bentley said he supports this.

Perhaps the most promising recommendation is for subsidies for homeowners wanting to storm-proof their properties. It’s a smart way to go. Bentley immediately came out in favor of this – but said he is not certain how much money to allocate. The commission suggested $100 million. Let’s hope it doesn’t take two years to decide on a figure.

Topics Legislation Homeowners Alabama