NC Homeowners Insurance Willo Kelly

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NC HomeownersInsuranceWillo Kelly Government
Affairs DirectorOuter Banks Association of
RealtorsOuter Banks Home Builders Association
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NC-20

• Background
• Mission
• To support the common environmental and
  sustainable economic development
  interests within the 20 coastal counties

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Property Insurance Overview

• NC Rate Bureau - Territories
• NC Department of Insurance
• Insurance Commissioner
• Beach Plan/Fair Plan
• Beach Plan Board/Fair Plan Board
• Voluntary Market, Surplus Carriers, Market of
  Last Resort
• Policies Dwelling/Homeowners/Wind Only

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New Homeowners Insurance Rates Became Effective
May 1, 2009The third such change within five
years!
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WHY?

• Loss Experience
• Storm Losses
• Hurricanes
• Increased Construction Costs
• Risk
• Modeling Loss Projections

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1993 2009 Comparison
Rates per 75,000 of Coverage
1993 2009 Charlotte
351 344 Gaston, Mecklenburg,
Union 350 324 Ashe, Buncombe,
Burke 319 312 Alamance, Guilford,
Davidson 350 364 Carteret,
Currituck, Dare, Hyde 578 1,379 Brunswick,
New Hanover 578 1,522
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As of May 1, 2009 Policyholders in 32 Counties
and the City of Charlotte are paying less for
Homeowners Insurance than they did in 1993!
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2008 Rate Filing Data2001-2005

• Four hurricanes made landfall on the Coast
  Isabel, Alex, Charley and Ophelia
• Five other hurricanes affected the state
  Francis, Gaston, Ivan, Jeanne, Cindy

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Comparison of Losses

• Total Statewide Losses - 2.47 Billion
• 18 Eastern NC Counties - 259 Million
• 82 Other NC Counties - 2.21 Billion
• 18 Eastern NC 10
• 82 Counties 90

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Wind Losses2001-2005

• 18 Eastern NC Counties - 121,297,407
• 82 NC Counties - 411,154,637
• 18 Eastern NC Counties 23
• 82 NC Counties 77
• The 29 western NC County Territory of Ashe,
  Buncombe, Avery, Catawba, Macon, etc. incurred
  35 million more in wind losses than the 18
  Eastern NC Counties.

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Average Premium Dollar Paid for Losses 2001-2005

• Currituck, Dare Hyde- 0.06
• Brunswick, Carteret, New Hanover, Onslow and
  Pender Barrier Island Area
• 0.07
• Ashe, Avery, Buncombe, Catawba, Madison
• 0.21
• 18 Eastern NC Counties - 0.12
• 82 NC Counties - 0.17

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Beach Plan

• House Bill 1305 Ratified August 6, 2009 Changes
  to Beach Plan (NCIUA)
• Renames Beach Plan the
• Coastal Property Insurance Pool.

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Beach Plan Changes

• Maximum Coverage Limits lowered from 1.5 million
  to 750,000
• Deductible of 1 per named storm other
  deductibles to be allowed
• Personal property lowered to 40
• Mitigation credit schedule to be established
• Public notice of Rate Bureau filing

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Beach Plan Changes

• NO NEW SURCHARGES any future surcharge increase
  will have to be approved by the NC General
  Assembly.
• A SAVINGS OF OVER
• 15 MILLION TO EASTERN NC POLICYHOLDERS

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Beach Plan Changes

• Companies statewide have non-recoupable
  assessment cap at 1 Billion.
• Recoupable assessments 10 per policy until
  losses recouped.
• No distribution of surplus.

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Other Provisions in HB 1305

• The Association shall be audited on an annual
  basis by an auditor selected by the Commissioner.
  
• Each member company shall report by February 1 of
  each year to the Commissioner the amount of
  coverage written in the preceding year in the
  beach and coastal area.

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What Happened?

• State Farm abandons 1,600 beach area
  policyholders.
• Nationwide tells policyholders no more wind
  coverage.
• Legislative Research Commission MAY study ???
  Shall submit a final report to the 2011 General
  Assembly?

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January 2011

• Dwelling Policy Rate Filing unwarranted,
  unsubstantiated
• Public Comment Session Held
• Beach Plan ordered to retrieve 16 million in
  illegal distributions
• Commissioner Goodwin asks for PAC money
  contributions for 2012 campaign prior to start of
  session

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Dwelling Rate Filing

• Represents 20.9 average increase statewide
• Two components of dwelling policies
• Fire
• Extended Coverage includes windstorm and hail

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Dwelling Rate Filing

• Average statewide wind increase of 42
• Proposed coastal wind increase of 1,000 on a
  300,000 structure
• Proposed coastal rates are up to 10 times higher
  than the rest of the state
• Increases impact housing costs
• Dwelling wind was surcharged May 1, 2010
• Building base rate change of 16.4/2.5

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Proposed Wind RatesPer 15,000 Coverage

• 
  Current Proposed
• Charlotte 14 22
• Gaston, Mecklenburg, Union 16
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• Ashe, Buncombe, Burke 20 30
• Alamance, Guilford, Davidson 21
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• Carteret, Currituck, Dare, Hyde 171
  222
• Beaufort, Jones, Washington 100
  139

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Dwelling Rate Filing

• Losses adjusted to a 250 standard deductible
  does not factor in 1 named storm deductible
• Does not consider NC Building Code
• Beach Plan Dwelling Wind increased in 2010
• Actual Cash Values vs. Replacement Cost Exposure
• Shows increased repair costs

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Be Informed

• Check the Dwelling value on your policy. In
  many cases, this amount is overvalued and could
  have increased without notice or explanation.
  Recent policy review shows a 7.8 inflationary
  factor applied to dwelling values at policy
  renewal.
• Your dwelling value should be the cost to rebuild
  only the structure not the cost of the
  driveway, septic system, bulkheading,
  engineering/surveying costs, decks, etc.
• Your premium is based on the dwelling value on
  your policy and is typically not the market
  value!
• Contact Your Agent

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Long-Term Solutions

• Ask legislators to
• Address statewide property insurance reform!
• Enforce Section 8 of HB 1305 and have the
  Legislative Research Commission study the rate
  making process and the feasibility of an
  Insurance Commission.

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• Increase industry transparency by establishing
  mandatory catastrophe reserves for property and
  casualty companies establish a statewide
  catastrophe fund.
• Catastrophes include not only hurricanes, but
  tornadoes, wildfires, ice storms, etc.

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• Willo Kelly
• willokelly_at_gmail.com
• [phone]