4/11/2012
Chicago Tribune
As weather disasters strike with more frequency, U.S.
homeowners first get hit with the destruction or total
loss of property. Many are then hit with the unexpected
loss of homeowners insurance policies as insurance
companies re-evaluate their financial liabilities.
After a tornado ripped through Springfield,
Massachusetts, last year, R. Paula Lazzari's home was
badly damaged. The retired teacher found broken windows,
missing siding and a damaged roof. Her insurer offered
to fund repairs for one broken window and some of the
siding. It took nine months -- and mediation services
from an independent adjuster and the Massachusetts
Division of Insurance -- to get her bills paid,
according to the parties involved.
In this era of unpredictable weather patterns, Lazzari's
case is not unique. Insurance companies are raising
rates, cutting coverage, balking at some payouts and
generally shifting more expense and liability to
homeowners, according to reports from the industry and
its critics.
"Insurance companies have significantly and methodically
decreased their financial responsibility for weather
catastrophes like hurricanes, tornados and floods in
recent years," the Consumer Federation of America said
in a statement after studying industry data.
The industry concedes that it is trying to avoid getting
trounced by those same punishing weather patterns.
"Last year (2011) was an extraordinary year for natural
disasters," said Michael Barry of the Insurance
Information Institute (III), an industry trade group.
"Insurers have taken a step back to assess whether or
not they can absorb severe losses."
STATES LEFT IN THE COLD
Some insurance companies have pulled out of
weather-challenged states -- meaning they will not write
new homeowners policies and may not renew contracts with
current policyholders.
In the wake of
Hurricane Irene
last summer, for example, Allstate informed some 45,000
North Carolina policyholders that it would not renew
contracts that were not bundled with auto insurance.
After a spate of
tornadoes
last April caused $11 billion of property damage in
Alabama, Alfa Mutual Group announced it would not renew
73,000 Alabama property insurance policies.
"The increased frequency and severity of storms over the
last decade have highlighted the need for Alfa to review
its overall property portfolio," Alfa President Jerry
Newby said in a statement.
Florida, where insurers have been dropping coverage
since
Hurricane Andrew in 1992, is a good example of where this can lead. With
an annual average of $1,460 per home, homeowners'
premiums there are second-highest in the country (Texas,
at $1,511 is first), according to the most recent data
available, a 2010 report from the Insurance Information
Institute.
"Florida's off the charts when it comes to pricing,"
said Mike McCartin, an Ashton, Maryland, independent
insurance agent.
The state has stepped in to cover some 1.5 million
properties via its publicly funded Citizens Property and
Insurance Corporation as insurers drop more and more
homes.
"You simply have major private insurers that are
unwilling to write policies in Florida," said Robin
Westcott, the state's insurance consumer advocate.
"It's just a tough market to be in," said Phil Supple, a
spokesman for State Farm, which was once Florida's
largest property insurer. It stopped writing new
homeowners' policies there in 2007.
CHERRY-PICKING OF CUSTOMERS
Even though companies are not abandoning states at will,
many opt to drop coverage on individual homes or
customers that may seem prone to file claims. Insurers
generally work on three-year contracts with homeowners,
Barry said. At the end of those contracts, insurers can
decide to raise rates or not renew.
When frozen pipes caused flooding in Phil Berger's
Ijamsville, Maryland, home last year, he got a $6,000
check from Allstate for the damages -- and a policy
review. Berger said an Allstate contractor told him to
make $100,000 in repairs to his home at his expense or
he would lose his coverage. He refused, and instead
found a less expensive policy with a company that
required only one smaller repair before covering the
home.