The Coastal Insurance Working Group (CIWG) has revealed new details regarding possible changes to the Alabama Insurance Underwriters Association (AIUA) and the “coastal band” of wind insurers along the Gulf Coast. The group has until December 31 to submit its reform recommendations to Alabama Governor Robert Bentley.
Several officials believe that the plans are not sufficient to address the issues of the functionally uninsured who live along Alabama’s coast. The functionally uninsured are those who, while managing to pay monthly for their insurance, do not have enough money in their savings to cover the cost of damages since their policies have high deductibles.
The AIUA is owned by the property insurance industry. It has around $82 million in capital and equity with $5.5 million in retained surplus. The rest of the money belongs to the insurance companies contracted by the AIUA, Department of Insurance Deputy Commissioner Charles Angell confirmed. Through the CIWG plan, insurers would be asked to leave the money in the AIUA to let it accumulate during periods between hurricanes.
Angell stated that the reforms would let the AIUA lower annual wind premiums by 50%. At present, the average AIUA insurance plan has premiums of about $2000. Should the plan be approved, policyholders might be asked to make a one-time contribution to the AIUA. The contribution would be taken from a small percentage of the targeted $1000 in savings.
The plan will feature a 1%, 2%, or 5% deductible, with the $1000 premium based on selection of the 2% deductible. Depending on what deductibles policyholders choose, the premium would adjust to be higher or lower.
The CIWG presented the new plan to local elected officials and a legislative delegation representing Baldwin-Mobile. Several concerns were raised among those present, including the possibility of residents having to pay high deductibles in the event of a major storm, dealing with assessments as high as 28% that could cost policyholders more, and premium hikes still too high for some to keep up with.
The plan is still open to more changes to address these concerns, and Angell was quick to offer solutions to the problems identified. The CIWG is also still considering creating a coastal band of insurance—states from Texas to Florida cooperating to form a hurricane insurer for all those involved. A parity bill based on information gathered by Alabama’s recent Clarity Law is still up in the air; the bill would require insurers to write policies at the same rate statewide.
