Gov. Robert Bentley establishes center to study cost, availability of homeowners’ insurance

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Gov. Robert Bentley, seen here on July 10, 2013, has established a center to study the cost and availability of homeowners' insurance.  (Montgomery Advertiser, Mickey Welsh)

Gov. Robert Bentley, seen here on July 10, 2013, has established a center to study the cost and availability of homeowners’ insurance. (Montgomery Advertiser, Mickey Welsh)

Gov. Robert Bentley Wednesday signed an order establishing a center to study the availability and cost of homeowners’ insurance in Alabama, a major issue in the state’s coastal areas.

The Alabama Center for Insurance Information & Research will aim to provide information to property owners and policy makers on the issue, while researching availability and cost.

“This will be a source of information that helps homeowners make informed decisions,” Bentley said in a statement. “This will help encourage competition, which will also benefit consumers. And I believe that, over time, the work of this center can make insurance premiums more affordable while connecting more people with the comprehensive types of coverage they need.”

Insurance premiums and deductibles began skyrocketing in Mobile and Baldwin counties following Hurricane Ivan in 2004 and Hurricane Katrina in 2005. According to the Associated Press, the cost of homeowners’ insurance nationwide increased 36 percent between 2003 and 2010, with significantly larger increases in coastal areas.

The average homeowners’ insurance premium in Alabama in 2010 was $1,050 a year, according to the Insurance Information Institute, an industry organization. That was about 15.5 percent higher than the national average of $909 a year, and the 10th highest among the 50 states and the District of Columbia.

The III says rates are being driven by the low rates of return on policyholders’ surplus, rising construction costs and “growing severity and frequency of natural catastrophes,” particularly in areas the industry had assumed were low-risk.

The high premiums along the coast have led to a surge in the number of people joining the Alabama Insurance Underwriting Association (AIUA), also known as the beach pool, an insurer of last resort. According to the AIUA, the number of policies in force has jumped from 2,909 in Dec. 2004 to 29,014 in August.

The commission’s members will consist of representatives from the governor’s office; the state departments of Insurance and Revenue; the Alabama Bankers Association; the Alabama Mortgage Bankers Association; the Home Builders Association of Alabama; Alabama Smart Homes the chair of the House insurance committee; the chair of the Senate’s Banking and Insurance Committee and representatives of consumer groups and nonprofits.

Jennifer Ardis, a spokeswoman for the governor, said the center will be funded by a $1 million conditional appropriation from the state’s education budget.

Bentley promised in his 2010 gubernatorial campaign to address the coastal insurance situation, and appointed a commission in 2011 to study the issue. He broadened the scope of the commission to statewide insurance issues following the tornadoes of April 27, 2011, which killed at least 238 people in Alabama and destroyed almost 14,000 homes. Bentley had speculated on the possibility of calling a special session to address the insurance issue, although one has not been called.

“If there’s a comprehensive solution, then he would be willing to call a special session,” Ardis said. “We are working to address the issue of homeowners’ insurance on the coast, and really statewide. It is a work in progress.”

– posted by Brian Lyman

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