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Alabama coastal homeowners want to know why their premiums are so high

Crawford Frazer

Hurricanes can cause significant damage — and most property owners understand that owning a home or business near the coast means higher insurance premiums. Yet some Alabama coastal homeowners suspect that they may be getting charged more than their fair share.

That’s why Alabama advocacy group the Homeowners Hurricane Insurance Initiative HHII) is pushing for passage of the “Property Insurance Clarity Bill.” The bill would require all insurers to publish how much they charge in premiums and how much they pay out in claims for every Alabama ZIP code.

Although HHII’s bill died in the Alabama Senate in 2010, it has gained the support of Sen. Ben Brooks R-Mobile) for the 2011 legislative session.

What’s in the Clarity Bill?

If passed, the Clarity Bill would impose these mandates:

  • Any insurer doing business in Alabama would have to provide policy and premium information to the Department of Insurance.
  • Information published by the department would include the number of policies written, the direct premiums earned and the direct incurred losses of every home insurer in the state. This information would be sorted by home and commercial policies and be arranged by county and ZIP code in Alabama.
  • That information also would be categorized by fire, non-catastrophe wind or hail, catastrophic wind or hail, water, theft, liability, tornado and wind-driven water.
  • The rate-making methodology allowed by the Department of Insurance would be published.
  • The bill would give insurance companies a timeline for compliance — and penalties if they fail to comply.

The debate

Even though nearly all counties not just coastal ones) were declared disaster areas after Hurricane Ivan, coastal homeowners say they took the biggest hit when it came to home insurance premium hikes. According to Alabama news website, HHII meetings held in Mobile and Baldwin counties attracted coastal residents who had seen their annual premiums triple, quadruple or worse.

On the other side, some insurance companies strongly oppose the bill. David Majors of State Farm, for example, told that excessive government regulation would drive private insurers out of the state entirely. Moreover, according to the Insurance Journal, insurers worry that making premium information public will make it open to misinterpretation.

Meanwhile, Alabama Gov. Robert Bentley has given mixed messages. At one point, he told that the free market should set insurance premiums. During his campaign, however, he promised to find a solution for coastal residents; in February 2011, he said the Clarity Bill deserved consideration.

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