Alabama natural disasters contribute to homeowners, property insurance increases

Business decisions to insure the best possible cash flow included a change in insurance this year for Bertha poultry farmer Eric Blankenship.

Blankenship, who had insured his farm and other property with the same company for 15 years, switched his coverage when rates increased 20 percent.

Blankenship is among thousands of property and homeowner policyholders in the Wiregrass who were affected by insurance companies’ recent decisions to increase rates and coverage or non-renew some policies in Alabama. Some of the companies - including the state’s second and third largest home insurers, Alfa Mutual Insurance Co. and Allstate Indemnity Co. - have reported that at least some of the changes were in direct relation to the April 27 tornadoes in north Alabama.

The Alabama Department of Insurance reported that total insured losses from the storms were estimated between $1.9 billion and $2.6 billion in May, making it the state’s costliest storm next to Hurricane Ivan by around $600 million.

Alfa reported that April 27 was also the costliest for the insurance company, with around 25,000 claims filed that were valued at more than the claims filed after Ivan. In June, the company announced it would non-renew an estimated 73,000 of its property policies.

Alfa spokesman Jeff Helms said the number of non-renewals has since been reduced by around 10 percent, but reflected a number of homeowner policies on rental properties that could be better covered under a commercial insurance policy.

Helms said a 20-percent rate increase by Alfa that took effect last month was a result of a 10 to 15-year trend of natural disasters in the state. This month, the company also increased its rates on mobile home coverage by an average of 15.6 percent, while auto insurance declined in July by 0.7 percent.

Helms said natural disasters in the state have caused several companies to rethink risk management strategies, but that Alfa offered non-renewed policyholders assistance through Alfa Agency with finding coverage elsewhere.

“As a regulated industry we have to charge enough premium so that we can pay any anticipated claims in the future. In some cases this can be done by adjusting a deductible for our customer, or by looking at the coverage in order to help control those costs,” he said.

“For policyholders with rental houses, the commercial coverage available through the agency often better meets the specialized needs of landlords who own multiple rental houses. Policyholders affected by the non-renewals are notified 120 days in advance of their renewal date.”

Baldwin County Probate Judge Tim Russell, who is chairman of the state’s Affordable Homeowners Insurance Commission that was formed by Gov. Robert Bentley, said Alabama ranks first in catastrophic loss per capita as a result of the storms and hurricanes the state has experienced in the last decade.

The commission has held five meetings across the state with policyholders and insurers for input on potential legislation to help, and the commission is expected next month to begin a series of education meetings in Montgomery with speakers from throughout the country.

“We understand that what’s driving up a lot of the cost is because of tornadoes, floods and hurricanes like Ivan and Katrina, but we want to counteract that,” Russell said.

“We are hoping we will be unified on a state level and that other areas that are not affected as much by natural disasters will support us, because we generate so much tax revenue that the rest of the state enjoys.”

April Swinton, a real estate investor in the Wiregrass, said property insurance changes have significantly affected real estate, particularly when it comes to gaining landlord policies for new rental properties.

“Nowadays you might have one insurance company that isn’t writing policies for whatever reason and you have to go to another company, which might send you to a secondary company to write the policy. All insurance is not the same, and sometimes secondary policies can charge more than your local companies,” she said.

State Farm spokesman David Majors said the company did not make any policy changes in direct relation to the April tornadoes, which resulted in a little more than 23,700 property and auto claims.

But Majors said the company expects to increase homeowners’ rates by an average of 5 percent statewide, while also decreasing its automobile rates. Homeowners’ rates in Baldwin and Mobile counties are generally expected to remain flat.

Mahogany McLain, a State Farm auto and renters insurance policy holder, said a decline in her auto insurance offset an almost doubled renters insurance policy.

“I’ve been a member five years now and my auto insurance has kind of fluctuated throughout time, but never to the point that I’d give it up. But if it had continued to go up, in the future I may have considered moving,” she said.

Blankenship said the increase from his previous company would have cost him an additional $2,000 per year.

“My business is pretty steady, but it’s like any other with some ups and downs sometimes. I’ve had my utilities and everything else like propane go up. There are times you have to tighten your belt up all the way across the board,” he said.

According to U.S. Census data, homeowners’ insurance premiums rose nationwide from $32.7 billion to $57.7 billion in 2009.

Alabama Natural Disasters since 2000

2011 Severe storms, tornadoes, flooding and straightline winds

2010 Tornadoes, flooding

2009 Tropical Storm Ida, severe storms and flooding

Severe storms, tornadoes, flooding and straightline winds

2008 Hurricane Gustav, Severe storms and flooding associated with Hurricane Ike

2007 Severe storms and tornadoes

2005 Hurricanes Katrina and Dennis

2004 Hurricane Ivan

2003 Severe storms, tornadoes and flooding

2002 Tropical Storm Isidore