Alabama Home Insurance Industry Strives to Rectify the Ills in the System

The state government of Alabama is on a mission—to cleanse the home insurance sector of its many ails and bring relief to homeowners who have been plagued by the scarcity of appropriate insurance policies that don’t cost the earth and skyrocketing premium prices that compel many to forego their policies. From Hurricane Katrina to SuperStorm Sandy and the many deadly tornadoes that strike the state every year, Alabamian homeowners have had to contend with Mother Nature’s fury and the consequent uphill task of rebuilding their homes and lives. Their situation is not a bit improved by the above-mentioned ills that pervade the home insurance sector. The sense of urgency being shown by the state government is thus understandable.

The Ailments: Unavailability of Policies and Sky-High Premium Rates

Alabama has seen a spate of natural disasters in the past few years and that too, on an unprecedented scale. Flooding, tornadoes, hailstorms, and high winds have caused widespread damage to houses in counties such as Blount, Lawrence, Madison, Marion, Morgan, Mobile, and Monroe. Communities in counties like Baldwin, Fayette, Lamar, Clarke, Winston, and Limestone too have suffered extensive damage due to these natural disasters. As a result, home insurers too have seen a considerable dent in their profit margins.

Many home insurance companies in these counties of Alabama have also seen their profits drop because of their inability to set a policy rate that would cover for these catastrophes. These insurers had based their calculations on climate data for the last 50 years when the weather used to be relatively calm.

Now, insurance companies need to make money to stay in the business. After seeing their profit margins plummet for one reason or the other, home insurers have not renewed the policies of many Alabama customers. Some others have increased the premium rates. In some counties, the annual rates have skyrocketed from around $800 to as high as $3,500 or $4,000. This has forced many homeowners to drop their policies entirely.

Government Efforts

In an effort to counter the ailments plaguing the home insurance sector in Alabama, Governor Robert Bentley formed the Alabama Affordable Homeowners Insurance Commission to analyze the problems being faced by the homeowners and devise effective solutions.

The Commission has proposed an amendment of existing insurance laws to help homeowners and also ensure that insurers do not go out of business. For instance, the Commission recommends the creation of savings accounts that will offer lucrative tax benefits on the money that homeowners keep aside to pay for storm damages. Home insurance companies will henceforth have to offer discounts on premium prices for homeowners who construct or upgrade their dwellings that adhere to the building codes. In this context, it is worth mentioning that the Commission has also recommended making building laws more stringent. It also plans to set aside some amount of money to provide as grants to homeowners in coastal regions like Baldwin and Mobile counties who cannot afford to make their homes safer.

The Commission has additionally recommended that the government provide financial assistance to those insurance companies that can currently provide only certain coverage plans to some individuals so that they many expand their operations all over the state. The Commission also feels that it is time insurers considered pursuing alternative coverage plans, like high-deductible policies that come with low premium amounts.

Homeowners in Alabama are eagerly looking forward to the implementation of these recommendations and believe that these will improve their situation.