THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 29, 1995 TAG: 9505290044
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: BY BETTY MITCHELL GRAY, STAFF WRITER
DATELINE: WASHINGTON, N.C. LENGTH: Long : 129 lines
It's been nearly three years since Hurricane Andrew struck the Florida coast and caused nearly $16.5 billion in damage, but North Carolina property owners have just begun to feel the effects of the storm.
Insurance companies have seen their profit margins shrink because of losses from Andrew and other dis-asters in recent years and are becoming increasingly reluctant to write policies for homes and businesses along the Outer Banks, according to the state Department of Insurance.
The state Coastal Resources Commission, which oversees development and environmental protection along the state's coast, says it's time for the state legislature and insurance commissioner to step in.
The commission on Friday unanimously approved a resolution that endorses three bills before the General Assembly to expand some types of insurance available to coastal property owners and to study how to make insurance more available to coastal residents.
The commission took the action after meeting Thursday with a representative of the state Insurance Department in Washington.
``It's not the insurance agents' fault. It's not the insurance companies' fault. It's certainly not the fault of the people living here,'' said David Diehl, policy and rate analyst with the state Insurance Department. ``The problem is, the insurance companies are scared.
``And unfortunately, no one has a good idea as to what to do to fix it,'' he said.
A 1994 Department of Insurance survey of 23 insurance companies that provide property and casualty insurance in North Carolina revealed some drop in the availability of property insurance throughout eastern North Carolina, Diehl said.
Of the companies surveyed:
One insurance company said it would not write any property insurance within three miles of the water and another company said it would not write any property insurance within 2 1/2 miles of the water.
None of the insurance companies surveyed said the Beach Territory, or property generally located east of the Intracoastal Waterway, is a preferred or target market for them.
None of the insurance companies surveyed said it is targeting the Beach Territory for new agency appointments.
Only three companies said they do not offer new policies for property insurance in the Beach Territory, but most said applications for coverage would have to be submitted to the company for a detailed review and many excluded wind from the coverages they offered.
Generally, the number of property and casualty insurance agents in eastern North Carolina stayed relatively constant from January 1993 to September 1994, but the percentage of insurance agents operating on the coast and the coverages they could offer fell, according to the survey.
Of the state's 5,514 insurance agents offering property and casualty coverages for the 23 companies surveyed, 570, or about 10 percent, were located east of Interstate 95 in January 1993. By September 1994, while the total number of statewide property and casualty agents for those companies had increased to 7,076, the number of eastern agents had fallen to 568.
While property owners along the Outer Banks have been particularly hard hit by declines in insurance coverage, all of eastern North Carolina has been affected over the last year, according to the survey.
From July 1, 1993, to Sept. 1, 1994, 10,599 homeowners and dwelling fire insurance policies covering property generally between Interstate 95 and the Atlantic Intracoastal Waterway were discontinued by the insurance companies surveyed.
``We know from the survey and we know from the calls we continue to get that there appears to be a problem,'' Diehl said.
Property owners who cannot obtain insurance coverage through insurance companies can obtain some protection through the so-called Beach Plan, established in North Carolina to provide an adequate market for essential property insurance, such as coverage for homes and businesses, for the beach area of the state.
But the insurance coverage available through the Beach Plan is usually more expensive and less comprehensive than coverage provided by insurance companies for homes and businesses in other parts of the state.
Two bills before the House Committee on Insurance would expand the coverages available through the Beach Plan and would require the plan to establish a reserve fund with future profits to guard against catastrophic loss.
A bill before the state Senate Appropriations Committee calls for a study of ways to improve the availability of insurance for coastal property.
After Hurricane Andrew hit the Florida coast on Aug. 24, 1992, eight insurance companies went out of business because they were unable to pay property owners' claims, according to news accounts at the time.
Many insurance companies fear the same types of losses in North Carolina if a severe storm were to hit the state's coast, Diehl said.
``It has been my observance that they prefer to quit while they're ahead,'' he said.
But commission member Reginald Caroon, a commercial fisherman, said the actions by the insurance companies, while they may be legal, are unfair to eastern North Carolina residents.
``It reminds me of someone who goes to Las Vegas and plays poker for a while,'' he said. ``The insurance companies make money and then leave us holding the bag.''
Some commission members said the General Assembly should enact legislation requiring companies that sell property and casualty insurance in the state to write their fair share of policies for coastal property.
``They can either write insurance on the coast or they can get out,'' said commission member Mollie Fearing, a Manteo insurance agent. ILLUSTRATION: COASTAL PROPERTY INSURANCE BILLS
Some of the bills pending in the General Assembly that would affect
insurance coverages available to coastal property owners, and the
status of those bills:
Senate Bill 345. Beach Plan Fund Reserve: This bill allows the
so-called Beach Plan to issue three-year policies and requires the
plan to establish reserve funds to pay for losses instead of
returning profits to member insurance companies as is the current
practice. It has been approved by the Senate and has been referred
to the House Committee on Insurance.
Senate Bill 880. Beach Property Insurance: This bill expands the
coverages available to property owners through the so-called Beach
Plan to include coverage for loss of rents, loss of income and
additional living expense as well as provide protection for gaps in
coverage caused by changes in local laws and ordinances. It has been
approved by the Senate and has been referred to the House Committee
on Insurance.
Senate Bill 881. Coastal Insurance Study: This bill authorizes a
legislative committee to study the availability and pricing of
property insurance in eastern and coastal North Carolina. The
committee's first report would be made to the General Assembly in
1996. The bill has been referred to the Senate Appropriations
Committee.
Source: N.C. Department of Insurance and General Assembly.
by CNB