Posted by Benji Riggins on January 26, 2010 under Insurance News | 
When it comes to government-created insurance, the state health plan isn’t the only entity facing trouble.
An attempt to fix an ailing coastal insurance plan made steps through the North Carolina House of Representatives this week as HB 1305: “Beach Plan Changes” passed the insurance committee Tuesday and moved on to finance.
“Over the last six months, my office, legislators, business owners and homeowners across the state have been working furiously to find an acceptable compromise so that we could avoid a statewide insurance crisis,” said North Carolina Commissioner of Insurance Wayne Goodwin. “It is vital that North Carolina pass meaningful legislation this session before the next hurricane or series of hurricanes hits.”
The North Carolina Insurance Underwriting Association (Beach Plan) was created by the General Assembly 40 years ago to provide supplementary wind and hail coverage for property owners on the barrier islands, who were often refused such coverage from standard insurance companies due to high-risk storm exposure.
The plan has since expanded to offer homeowner’s and wind/hail insurance for residential and business properties in 18 coastal counties,
The plan was created and is regulated by the state, but it is not a state entity. It’s an association of independent companies acting as one.
Currently, all property and casualty insurance companies that do business in North Carolina write and fund the plan — and share any losses or profits. According to Goodwin, the plan was designed as a last resort, offering coverage at a higher-than-standard rate to those who would otherwise not have it. But Beach Plan rates became lower than those of the voluntary market — and it has become the insurer of first resort on the N.C. coast.
In 2007, the plan provided the Department of Insurance with an actuarial report assessing that their rates were 76 percent inadequate. Officials say the plan is seriously unprepared to pay for the potential losses of a major storm.
If HB 1305 passes, those insured under the plan will pay higher premiums – and maximum coverage will be reduced from $1.5 million to $750,000.
But home owners across the state will be affected if a major storm costs the plan more than it has in the bank. The legislation enables member companies to tack up to 10 percent onto their customer’s bills in the form of a “catastrophic assessment recoupment” — but only if damages get up to around $2.4 billion.
A pivotal part of the bill relates to the tipping point at which private insurance companies can start passing the burden along, which has currently been set to $1 billion. The insurance industry originally wanted the threshold to be $100 million.
Department of Insurance spokesperson Kristin Milam explained the concept with a hypothetical scenario:
“If we had a major storm tomorrow, like a Hazel-type storm, the Beach Plan would use two-thirds of its $800 million surplus to pay claims; they would have to hold some back in case we get other storms throughout the year,” said Milam. “If the plan paid the first $600 million, then the member companies would have to chip in the next $600 million to get to the $1.2 billion reinsurance attachment point. If it goes beyond $1.2 billion in reinsurance, (the plan) would have to assess the member companies again.”
And the member companies would then assess their members with what has been called a 10 percent “surcharge.” But Goodwin said that’s not correct. A surcharge comes after the fact. A catastrophic assessment recoupment is a proactive measure.
“Other states have been reactive, and that has led to extraordinary insurance rate increases in those states,” Goodwin said. “By being proactive, North Carolina will provide consumers and the industry with certainty and have a much more stable and competitive insurance market.”
Officials say that if insurance companies don’t know how much they will be liable for and if they will be adequately compensated, they’re liable to pull their business out of North Carolina — like State Farm recently did in Florida.
“Florida presented a unique set of circumstances,” said State Farm Spokesman Russ Dubisky. “Right now, State Farm is committed to our business in North Carolina. State Farm sees HB 1305 as an incremental step in the right direction. Eventually, we hope to see the Beach Plan become independently solvent by building its reserves, purchasing adequate reinsurance, and truly acting as the market of last resort.”
That’s another important piece of the legislation. Let’s say there are no major storms this year, and the Beach Plan makes a profit. Under HB 1305, member companies will no longer get to take their share of that profit. It will go straight into the Beach Plan surplus and build over time.
“The more money that the beach Plan has in the bank, the larger the storm or series of storms it can handle without turning to its member companies, and subsequently, policyholders,” said Goodwin in a speech to the Insurance Committee on June 25.
“And, as you all know, no one piece of legislation is perfect and this bill certainly is not perfect. But legislation, particularly involving complex subjects, is often about compromise.”
by Olivia Webb
Tags: home insurance, home insurance nc, home insurance north carolina, house insurance, house insurance nc, house insurance north carolina, insurance, insurance agency, insurance agent, insurance nc, insurance north carolina, nc beach plan
Posted by Benji Riggins on December 16, 2009 under Flood |
Time is running out once again for the National Flood Insurance Program, which is set to expire on Dec. 18.
Congress passed a short-term extension in September that moved the expiration deadline for NFIP to Dec. 18, 2009. But if Congress fails to act again this week, the main source of protection against flooding for more than five and a half million homeowners could be in jeopardy, potentially costing the government and taxpayers billions of dollars.
Insurers are urging Congress to pass an extension to the NFIP before it’s too late.
“The expiration of the flood insurance program could have severe consequences on the economy and directly impact consumers,” said David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI).
PCI says that a continuing resolution will likely pass today that will extend the NFIP through Dec. 23. The continuing resolution will give the Senate a few more days to work on the Defense Appropriations bill, which would now extend the program through Feb. 28, 2010.
“We cannot afford to compound the economic challenges our nation already faces by allowing the NFIP to lapse,” Sampson said. “If NFIP expired, real-estate transactions in flood-prone areas could collapse, resulting in even more devastation for the housing market.”
Source: PCI
Posted by Benji Riggins on December 11, 2009 under Safety |
A recently released report from the Insurance Information Institute (I.I.I.) produced some eye-opening statistics regarding dog bites. According to the study, dog bites account for one-third of all homeowners’ insurance liability claims, costing $387.2 million in 2008, up 8.7 percent from 2007.
An analysis of homeowners insurance data by the I.I.I. found that the average cost of dog bite claims was $24,461 in 2008 (the most recent figures available) down slightly from $24,511 in 2007. Since 2003, however, the cost of these claims has risen nearly 28 percent. Additionally, the number of claims has increased 8.89 percent annually to 15,823 in 2008 from 14,531 in 2007.
From an insurance and personal safety perspective, dog ownership seems to be a place where risk management can be helpful in reducing the exposure to injury. Avoidance is the most obvious approach. Statistically 61 percent of dog bites occur at the owner’s home; and 77 percent are by the dog of a family member or family friend.
Is it the Owner or the Breed?
In September 2000, a Vet Med Today Special Report (JAVMA, Vol 217, No. 6, September 15, 2000) listed the dog breeds most responsible for the 282 bite-related fatalities between 1979 and 1998. The top five breeds (themselves responsible for 64.9 percent of all dog-bite fatalities) were:
- Pit bull (26.95 percent of all fatalities);
- Rottweiler (15.6 percent of all fatalities);
- German Shepherd;
- Husky; and
- Malamute.
Many people love and want dogs and there is some indication that pet ownership is healthy, especially for senior citizens. Dogs also provide security for persons and property. Those who choose to own a dog must apply other risk management steps to make dog ownership safer as well as enjoyable. The Centers for Disease Control and Prevention in Atlanta suggest that:
- Owners should carefully choose your pet dog by evaluating the environment and lifestyle. Potential owners should speak with a professional to determine the appropriate type of pet.
- Dogs should be neutered to reduce aggressive tendencies.
- Never leave infants or young children alone with a dog.
- Be sensitive to cues that a child is fearful or apprehensive about a dog.
- Children be taught basic safety around dogs (and reviewed regularly).
- Dogs with histories of aggression are inappropriate for families with children.
- Owners should not play aggressive games with their dog (i.e. wrestling).
- If bitten, the bite should be reported immediately.
Dog Owner Liability
States differ on how they legally view dog bites. There are three kinds of law that govern the liability or responsibility imposed on dog owners:
- Dog-bite statute: The dog owner is automatically (or strictly) liable for any injury or property damage the dog causes, even without provocation (a trespasser or someone committing a crime may be exceptions).
- “One-bite” rule: In approximately 18 states, the owner is not held liable for the first bite the dog inflicts. Once an animal has demonstrated vicious behavior, such as biting or otherwise displaying a “vicious propensity,” the owner can be held liable. Some states have moved away from the absolute application of the one-bite rule and at times hold owners responsible for any injury, regardless of whether the animal has previously bitten someone. These are known as “mixed dog bite statute states” as they apply a mixture of the “one-bite” rule and the strict liability of the previously listed dog-bite statute.
- Negligence laws: The dog owner is liable if the injury occurred because the dog owner was unreasonably careless (negligent) in controlling the dog.
In most states, dog owners are not liable to trespassers who are injured by a dog. A dog owner who is legally responsible for an injury to a person or property may be responsible for reimbursing the injured person for medical bills, lost wages, pain and suffering and property damage.
Insurer Response
Claims frequency and costs from dog bites have escalated. Insurers, who are usually responsible for these costs under Homeowners policies, are now taking this problem very seriously. In most states the Homeowners’ program has no provisions for excluding the legal responsibility for dog bites and no provisions for charging additional premiums for the increased exposure. Consequently, insurers must underwrite around the exposure. This means not accepting risks where there is a known increased exposure and deciding not to renew risks when the underwriter becomes aware of an exposure after initial acceptance. Many insurers are attempting to underwrite the dog exposure by identifying the breed of the dog in question and assessing the extent to which the exposure is increased.
Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS
MyNewMarkets.com
Insurance Journal
Associate Editor
800-897-9965 x137
www.MyNewMarkets.com
Posted by Benji Riggins on September 25, 2009 under Flood |
On October 1, 2009, important changes to the NFIP will take effect. There will be an increase in rates, the standard deductibles, and the basic insurance limits. These combined changes will result in an average premium increase of 8 percent . Many policyholders will have questions about these changes. To help you best serve our clients, we have developed a number of “answers to possible questions” to help our customers better understand how these changes will affect them.
Q: Why are my premiums going up?
A: It is not uncommon for insurance companies to implement annual rate increases to help offset their increased costs, including inflation. The NFIP, like most insurance companies, has found it necessary to implement these important program changes to ensure that current premiums more accurately reflect the current risks.
Q: Are the rates increasing to collect the premium dollars that were used to pay for claims as a result of Hurricane Katrina?
A: No. It is a misconception that rate increases happen to offset debts attributed to Hurricane Katrina or any past event. Actually, Federal regulations clearly state that the NFIP cannot raise rates to recoup for previous losses. Simply put, NFIP premiums only reflect expected future losses and expenses. There is no charge contained in the premium to recoup past losses.
Q: Why is my deductible doubling?
A: The NFIP’s previous minimum deductibles were in place for more than 10 years. The NFIP found it necessary to discontinue the minimum deductible of $500 and increase the new standard deductibles to avoid overall larger premium increases.
It is important to remember, that in most cases the deductible is only a fraction of the average flood insurance claim, which can cost tens of thousands of dollars.
Q: Why are the basic limits of coverage on the Standard Flood Insurance Policy (SFIP) for residential and non-residential buildings increasing?
A: The NFIP takes many steps to financially prepare for future flooding. In order to do so, the basic limit of coverage, the level which sustains the most damage in a flood, needs to be brought into better alignment with the typical NFIP paid claim.
If you purchase flood insurance beyond the basic limit, you will receive more coverage at a lesser charge. And, to get full replacement cost for your primary residence in the event of a flood, you must insure your building to at least 80 percent of its replacement value (or $250,000, whichever is less).
Posted by Benji Riggins on September 18, 2009 under Claims |
Man’s best friend is sinking its teeth into homeowners insurance costs. Dog bites account for one-third of all homeowners insurance liability claims, costing $387.20 million in 2008, up 8.70 percent from 2007, according to the Insurance Information Institute (I.I.I.).
An analysis of homeowners insurance data by the I.I.I. found that the average cost of dog bite claims was $24,461 in 2008 (the most recent figures available) down slightly from $24,511 in 2007. Since 2003, however, the cost of these claims has risen nearly 28 percent. Additionally, the number of claims has increased 8.89 percent to 15,823 in 2008 from 14,531 in 2007.
“The rise in dog bite claims over the course of the past five years can be attributable to the increased medical costs as well as the size of settlements, judgments and jury awards which have risen well above inflation in recent years,” said Loretta Worters, vice president of the I.I.I.
More than 4.5 million people in the U.S. are bitten by dogs annually, and nearly 900,000 of those — half of them children — require medical care, according to the Centers for Disease Control and Prevention (CDC). More than 31,000 Americans needed reconstructive surgery after dogs attacked them in 2006, center figures show. With more than 50 percent of bites occurring on the dog owner’s property, the issue is a major source of concern for insurers.
Dog Owner Liability
There are three kinds of law that impose liability on owners:
- Dog-bite statute: The dog owner is automatically liable for any injury or property damage the dog causes, even without provocation.
- “One-bite” rule: In some states, the owner is not held liable for the first bite the dog inflicts. Once an animal has demonstrated vicious behavior, such as biting or otherwise displaying a “vicious propensity”, the owner can be held liable. Some states have moved away from the one-bite rule and hold owners responsible for any injury, regardless of whether the animal has previously bitten someone.
- Negligence laws: The dog owner is liable if the injury occurred because the dog owner was unreasonably careless (negligent) in controlling the dog.
In most states, dog owners are not liable to trespassers who are injured by a dog. A dog owner who is legally responsible for an injury to a person or property may be responsible for reimbursing the injured person for medical bills, lost wages, pain and suffering and property damage.
“Although some people purchase dogs for the purpose of guarding their homes, deadbolt locks and home security systems are safe burglary deterrents and that will often earn you a discount on your insurance premium,” said Worters.
A single lawsuit — even if won — can end up costing hundreds of thousands of dollars, Worters said.
“Most dogs are friendly, loving members of the family,” said Worters. “But even normally docile dogs may bite when they are frightened or when protecting their puppies, owners or food. Ultimately, the responsibility for properly training and controlling a dog rests with the owner.”
Posted by Benji Riggins on August 28, 2009 under Insurance News |
North Carolina Governor Bev Perdue has signed into law legislation to shore-up the state’s backup coastal insurer and reduce the liability of private insurers should a major catastrophe strike the state.
House Bill 1305 also sets limits on the coverage that can be sold by the North Carolina Insurance Underwriting Association, known as the the Beach Plan, and requires insurers to offer discounts for storm mitigation efforts by policyholders.
The signing came more than two weeks after House and Senate lawmakers reached agreement on the bill, which was sponsored by Rep. Hugh Holliman in the House and led by Sen. Tony Rand in the Senate.
The bill (HB 1305) that is now law is intended to reduce the exposure and prevent a funding shortfall in the Beach Plan, which insures 170,000 properties valued at nearly $74 billion in 18 coastal counties.
The measure was supported by lobbyists for the property/casualty insurers who said it was necessary to provide certainty and stability in the private marketplace.
Momentum for the reform was helped by an actuarial report, commissioned by the Property Casualty Insurers Association of America (PCI), that showed the Beach Plan was seriously underfunded. According to that report, the Beach Plan has no more than $1.5 billion available to pay for hurricane losses. However, a large storm could cost more than $7 billion, leaving a $6.2 billion deficit and affecting the plan’s ability to pay claims.
The bill addresses this concern by capping private insurers’ liability at $1 billion if the state insurer’s funds fall short and providing for surcharges on all policyholders in the unlikely event that there is such a devastating storm that even more funds are needed
Private insurers say the certainty the $1 billion liability cap provides them is important to their ability to properly price policies. Several insurers have stopped writing business in the state out of concern over the uncapped liability.
Any surcharges on policyholders statewide would be limited to no more than 10 percent annually and could begin only after the Beach Plan exhausts its surplus, about $2.4 billion in reinsurance and the $1 billion private insurer non-recoupable amount.
The law also requires the Beach Plan to limit the coverage it offers on residential properties to $750,000 and on commercial properties to $3 million. It now offers limits twice those amounts. Contents of habitational property could be insured only up to 40 percent of the home or building value under the bill.
If the value of the property exceeds the new maximum coverage limits available from the Beach Plan, the property owner must arrange to purchcase the excess coverage in the private market before the Beach Plan can issue its policy.
The Beach Plan’s rates for standalone wind and hail coverage must be 5 percent more than those of private insurers, and rates for full homeowners policies that include wind and hail coverage must be 15 percent higher. The industry had preferred that Beach Plan rates be even higher to further encourage policyholders to buy policies from the private market rather than the more expensive state insurer.
The new law requires the private market, as well as the Beach Plan, to file rating plans including mitigation discounts.
“Governor Perdue has taken an important step today in securing the financial stability of North Carolina following a hurricane or major storm,” said David Sampson, president and CEO of the insurer lobby PCI. “HB 1305 will reform the Beach Plan, protect consumers across the state and improve the property insurance market.”
The law has already convinced one insurer to begin writing in the state. A subsidiary of AAA Carolinas said its decision was in response to the passage of HB 1305.
Posted by Benji Riggins on August 21, 2009 under Safety |
Federal law enforcement officials say they have busted a home burglary gang that operated for several years in North Carolina and South Carolina.
The ring is believed responsible for hundreds of home burglaries and hundreds of thousands of dollars in stolen personal property, including more than 125 firearms.
The U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives said at least nine people have been indicted for particpation in the ring.
The ATF said the ring consisted of mostly multi-convicted felons who targeted homes in the North Carolina counties of Stanly, Cabarrus, Anson, Rowan, Montgomery, Moore, Randolph, Davidson, Mecklenburg and Union, and the counties of York and Marlboro in South Carolina.
ATF said the members of this crime ring utilized sophisticated fixed and mobile surveillance and operated in organized teams with team leaders to identify and burglarize their targeted homes.
More than 10 law enforcement agencies along with ATF conducted a joint investigation covering multiple jurisdictions.
Posted by Benji Riggins on August 8, 2009 under Insurance News |
The North Carolina General Assembly has approved a bill to reform the state’s coastal insurance system that caps private insurers’ liability for any funding shortfall in the state-backed Beach Plan, reduces coverage for property owners who get coverage in the Beach Plan and requires insurers to offer discounts for storm mitigation efforts by policyholders.
The bill (HB 1305) is intended to reduce the exposure and prevent a funding shortfall in the North Carolina Insurance Underwriting Association, known as the Beach Plan, which insures 170,000 properties valued at nearly $74 billion in 18 coastal counties.
Yesterday, just before 5 p.m., the House concurred in a 92-19 vote with a Senate version of the bill. The measure now goes to Gov. Bev Perdue, who can sign it, veto it, or let it become law without her signature.
The measure was supported by property/casualty insurers whose lobbyists said it was necessary to provide certainty and stability in the private marketplace.
“Yesterday was good day for all insurance consumers in North Carolina. Elected officials have realized how out of kilter the current Beach Plan is and have taken steps to begin to rectify the situation,” said Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies (NAMIC).
While overall supportive of the reforms, the insurance industry came away slightly disappointed that a key rate differential provision backed by the House was watered down in the final version. The final bill requires that the Beach Plan’s rates for standalone wind and hail coverage be 5 percent more than those of private insurers, and rates for full homeowners policies that include wind and hail coverage be 15 percent higher– which is what current rules say. The industry preferred the House version that had called for different figures: 10 percent higher for wind/hail and 20 percent higher for full homeowners.
The rate differential is meant to reduce the exposure of the Beach Plan by encouraging policyholders to buy policies from the private market rather than the more expensive state insurer.
Reynolds conceded that the lower rate differential “will make it more difficult to quickly return the Beach Plan to the market of last resort.”
But she said the overall measure is the beginning of “many more incremental steps toward strengthening and diversifying not only the coastal insurance market in North Carolina, but the entire market in the state.”
The bill will require the private market, as well as the Beach Plan, to file rating plans including mitigation discounts.
Momentum for the reform was helped by an actuarial report, commissioned by the Property Casualty Insurers Association of America (PCI), that showed the Beach Plan was seriously underfunded. According to that report, the Beach Plan has no more than $1.5 billion available to pay for hurricane losses. However, a large storm could cost more than $7 billion, leaving a $6.2 billion deficit and affecting the plan’s ability to pay claims.
The bill addresses this concern by capping private insurers’ liability at $1 billion if the state insurer’s funds fall short and providing for surcharges on all policyholders in the unlikely event that there is such a devastating storm that more funds are needed.
Private insurers say the certainty this liability cap provides them is important to their ability to properly price policies. Several insurers have stopped writing business in the state out of concern over the uncapped liability.
“Lawmakers recognized that the Beach Plan is not financially stable which could hurt insurance policyholders across the state,” said Lynn Knauf, regional manager for PCI. “The General Assembly has responsibly chosen to solve the property insurance crisis before the storm, instead of after a devastating event, unlike the fate of some other coastal states.”
Any surcharges on policyholders statewide would be limited to no more than 10 percent annually and could begin only after the Beach Plan exhausts its surplus, about $2.4 billion in reinsurance and the $1 billion private insurer non-recoupable amount. This so-called “catastrophe recovery charge” would have to be clearly identified to policyholders on their premium statement, declarations page, or by some other electronic or written method.
As part of an attempt to control the state-backed insurer’s exposure, the measure requires the Beach Plan to limit the coverage it offers on residential properties to $750,000 and on commercial properties to $3 million. It now offers limits twice those amounts. Contents of habitational property could be insured only up to 40 percent of the home or building value under the bill.
If the value of the property exceeds the new maximum coverage limits available from the Beach Plan, the property owner must arrange to purchcase the excess coverage in the private market before the Beach Plan can issue its policy.
“This is a strong reform bill,” said Raymond G. Farmer, assistant vice president for the American Insurance Association’s southeast region. “It meets two key goals: first, putting the Beach Plan on a stronger financial footing, and second, giving private market insurers greater certainty as to their ultimate financial obligations should a major storm hit that depletes the Beach Plan’s claims paying resources.”
HB 1305 was sponsored by Rep. Hugh Holliman in the House and lead by Sen. Tony Rand in the Senate.
