Alabama panel endorses mitigation discounts, catastrophe savings accounts

by R.J. Lehmann on March 29, 2012

A panel appointed last year by Alabama Gov. Robert Bentley to offer recommendations to make homeowners insurance in the state more available and affordable has leant its endorsement to three proposals currently before the state Legislature, The Birmingham News reports.

In its first public action since it was created, the Affordable Homeowners Insurance Commission voted in support of proposals to create catastrophe savings accounts that would allow homeowners to set aside funds free from state tax to pay for costs from a major storm, including insurance deductibles and other uninsured repairs. The commission also endorsed requiring insurers to extend mitigation discounts currently offered in coastal Mobile and Baldwin counties statewide, and to allow captive insurers to sell auto insurance and receive private investment capital.

The commission also voted that $100 million of the financial penalties paid to the state from the 2010 BP oil spill should be devoted to homeowners’ storm mitigation grants, while The News reported that insurance industry and consumer advocates appear to have come to a compromise on a separate bill – one of several the commission will consider endorsing at a meeting next month – to require insurers detail in a publicly accessible database how much each covered peril, such wind or fire, contributed to their losses.

Under the compromise, insurers would have to detail how much each type of coverage, such as wind or fire, contributed to their losses, but they would not have to provide such detailed information for their premium charges and could merely show their total premiums for all types of coverage.

The (Athens, Ala.) News-Courier reported that a spokesman for the state’s second largest insurer and largest domestic company, Alfa Insurance, supports catastrophe savings accounts, as well as strengthening building codes, which has not yet received the commission’s endorsement. The company otherwise endorsed approaches to encourage competition in the state:

“The more carriers we have that will write in that region and take the risk, the better it should end up for homeowners,” (Alfa Communications Director Jeff) Helms said. “We believe that’s the best approach and could drive down the cost.”

One possible approach to achieve that end could be a bill we’ve reported on previously here at OOTS, which would offer incentives to insurers who agree to take policies out of the state wind pool. The Alabama Insurance Underwriters Association saw a sharp increase in participation in 2011, with its policies in-force growing to 23,892 and its total insured value up to $4.14 billion.

The commission’s final recommendations are expected shortly after the June start to the annual hurricane season, and Gov. Bentley could call a special session in late summer or early fall to consider insurance reform issues.

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