Insurance Vital to Alabama Coast Long-Term Plan, Says Commission

Coastal Alabama should seize the BP Gulf oil disaster as an opportunity for "resiliency planning" that will not only help the region recover from the oil damage but also put it in a position to better recover from any future disasters, whether natural or manmade, according to a sweeping report from a special commission.

The recently released report from the Alabama Coastal Recovery Commission, entitled "A Roadmap to Resilience," makes a case that risk management initiatives and private insurance markets are vital to this resiliency planning.

"The insurance industry forces a rubber-meets-the road discussion about resiliency planning because it establishes a dollar amount for perceived vulnerability. Despite the volatility of the debate over what's fair in regards to coastal insurance affordability, the bottom line is that somebody is going to pay the bill for the degree of risk the industry is willing to take," the report says.

The report contains numerous risk management and insurance recommendations including that the state strengthen its building code; find ways to attract new property insurers; encourage the sale of multi-year policies; require that insurers offering multi-peril policies show the separate premiums charged for wind and non-wind portions of policies; and that the state enact tax-free funds to help homeowners save for the cost of insurance deductibles and mitigation measures.

Its insurance and risk management recommendations can "help stabilize the cost of insurance and even lower insurance premiums," according to the commission.

"This will help workers live closer to their jobs and save for their children's education. It will help the coastal economy thrive. And it will help limit the number of people who are without property insurance or who are under-insured, reducing uninsured losses so that individuals and communities can recover more quickly from storms," the report says.

Beyond Claims

The plan calls for improving the claims process for people and businesses affected by the BP oil disaster and making sure any monies collected from BP or the government are spent where they will do the most good.

But it also goes beyond addressing immediate claims and financial needs to recommending broad efforts to restore South Alabama's beaches and the barrier islands; boost the state's seafood and tourism industries; and improve education, public safety and public health so that the recovery is sustainable.

The commission, launched by Gov. Bob Riley and hundreds of community leaders, collected testimony and research for 90 days to come up with its blueprint for South Alabama's future.

According to the commission, the BP oil spill is more than a temporary threat to Gulf coastlines; it is a catastrophe that may take decades to measure. "Its impacts transcend emergency response issues and have lasting implications for our coastal economy, ecology and social institutions," the report says.

According to the commission, the solution is for South Alabama to build regional capacity for long-term resilience.

"We must position ourselves to respond not only to future oil spills but also to other forces beyond our control, including everything from hurricanes to sudden shifts in the economic environment. We must assure a future for our coast that strengthens its appeal to visitors and investors from around the world and protects its environmental assets for generations to come," the commission states.

The far-reaching report calls for the creation of a Coastal Environmental Management Council to develop a comprehensive coastal resiliency plan. It wants this council to also work toward assuring that the water throughout coastal Alabama is fishable, swimmable and drinkable.

The report recommends the creation of a world-class marine and coastal institution on the level of the Scripps Institution of an Oceanography in California or Woods Hole Oceanographic Institution in Massachusetts focusing on the Gulf.

Insurance, Risk Management

The report emphasizes the roles of risk management, mitigation and insurance – and cooperation between the private and public sectors-- in helping the region achieve sustainable recovery.

"Achieving an acceptable balance of risks and costs for insuring coastal property is only possible if the responsibility is shared among property owners, government and the insurance industry," the report says.

The insurance industry must work with individuals and government to form a "three-pronged approach" so that homeowners strengthen their homes and states adopt tougher construction standards, according to the commission.

The report describes the insurance market on the coast since Hurricanes Ivan and Katrina as "unsustainable," one where demand for affordable, comprehensive insurance has far exceeded the supply. It is a market consisting of small regional insurance companies and one with little competition. The biggest problem is the lack of availability of wind coverage, which is forcing homeowners to obtain coverage though the insurer of last resort, the Alabama Insurance Underwriting Association, or from high-priced surplus lines insurers. The number of homeowners with wind pool policies under the AIUA has grown since Ivan, from about 3,500 policies to 18,865 as of Oct. 31. Many homeowners are simply going without coverage, according to the report.

Alabama should refrain from subsidizing the rates charged by the AIUA pool, according to the commission, citing problems with the Florida insurance market and the federal flood insurance program where governments have subsidized rates.

"If the overriding policy goal is to foster a competitive private market and give consumers more choice, subsidizing policies with taxpayer dollars should not be considered a viable, long-term option," the report says.

The report continues:

"In a purely market-driven environment, families and businesses pick up the total tab. To offset some of the burden on citizens and the regional economy, governments may reduce insurance providers' risk through subsidies. Or there might be combinations of public, private and non-profit approaches that mitigate risks and achieve levels of insurance affordability, making living and doing business on the coast easier for more folks.

"Definitions of acceptable affordability cover a wide range, however. And almost no one faced with high insurance premiums and high deductibles is going to be excited about paying the price. But the price is going to be paid one way or another."

Recommendations

So what should be done? How should costs and responsibilities be shared? The commission's insurance subcommittee, headed by former Alabama Insurance Commissioner Walter Bell, who is now an executive with Swiss Re, offered numerous recommendations in the areas of insurance and risk management. These include:

Mitigation Recommendations

1. Establish a trust fund to provide incentives and financing for homeowners to take mitigation measures.
2. 
   Commission a study of what hurricane models suggest that mandated mitigation discounts should be for homeowners in Alabama.
3. 
   Require consumers, Realtors and builders to identify to potential home buyers all the wind-mitigation features on a home.
4. 
   Evaluate whether to require admitted carriers to obtain proof of wind and flood coverage from consumers located in zones A and V.
5. 
   Develop a nonprofit entity to utilize FEMA's Hazard Mitigation Grant Program (HMGP).
6. Strengthen local inspection programs for mitigation measures by developing sources of funding to increase the operating budgets of local building-code departments.
7. 
   Encourage accurate mitigation inspections by requiring they be conducted by trained and licensed professionals.
8. 
   Eliminate sales tax on materials used to retrofit homes against the effects of storms.
9. 
   Educate consumers and other stakeholders about the potential insurance cost savings and return-on-investment that can come from fortifying and retrofitting their homes.

Building Standards Recommendations

1. Develop a strong statewide building code, or at minimum a strong, uniform code for local jurisdictions in Alabama's coastal counties to adopt.
2. Develop and implement a uniform process for localities to review construction plans and to inspect homes and buildings.
3. Work with stakeholders in the construction, sale, appraisal, and financing of homes and buildings to develop and implement stronger codes and a uniform review process.
4. Strengthen inspections and enforcement at the local level by developing sources of funding to increase the operating budgets of local building code departments.
5. Strengthen and develop programs to train and license local building-code officials to increase effectiveness of code enforcement throughout the coastal region.
6. Require insurance carriers to recognize industry-established Building Code Effectiveness Grading Standards (BCEGS) ratings and provide related discounts.
7. Develop and implement higher standards for freeboard levels for flooding, setbacks from water, and floodproof requirements.
8. Adopt and implement more restrictive local land-use policies that recognize risks associated with structures in flood-prone areas.
9. Encourage code uniformity by establishing that changes to local building standards will be adopted uniformly by all of the jurisdictions in Baldwin and Mobile counties.
10. Publicize information about stronger building standards with consumers and other stakeholders.
11. Develop entities and resources needed to gather data on the quality of construction of homes and buildings in the coastal region.
12. Develop ongoing involvement and dialogue among stakeholders through a new Alabama Insurance Institute.

Transparency and Education Recommendations

1. Increase transparency by making both insurers' rate filings and their aggregate historical data public information.
2. Require that insurers offering multi-peril policies show the separate premiums charged for wind and non-wind portions of policies on their declaration pages.
3. Require insurance companies provide consumers with a uniform disclosure form, or check list, showing what is included and not included in a residential policy.
4. Establish a new Alabama Insurance Institute by governor's executive decree to develop research, encourage dialogue and coordinate public education campaigns.

Market and Alternative Products Recommendations

1. Conduct a study on the concept of "recoupment," which would allow insurers participating in the wind pool to recoup potential assessments.
2. Conduct a study of premium tax revenues.
3. Conduct a study on the possibility of utilizing a captive insurance company to provide homeowners with short-term relief from the cost of insurance.
4. Encourage insurers to offer multi-year homeowners insurance policies to protect consumers against annual spikes in the cost of insurance.
5. Invite insurance companies to Alabama for an annual symposium to attract new carriers to the market.

Other Regulatory and Legislative Recommendations

1. Require licensing of contractors and subcontractors.
2. Enact an insurance fraud bill to protect consumers from unscrupulous agents and insurers and from consumers who defraud the insurance system.
3. Enact a reasonable statute of limitation for reporting property claims.
4. Enact and promote at the state level tax-free funds for individuals to help homeowners save for the cost of insurance deductibles and mitigation measures.
5. Encourage Alabama lawmakers in Washington, D.C., to reform the National Flood Insurance Program.
6. Encourage Alabama lawmakers in Washington, D.C., and Montgomery to find a resolution to wind and flood claim settlements and increase transparency.
7. Encourage Alabama lawmakers in Washington, D.C., to support and pursue a tax-deferred catastrophe reserve for insurance companies.

CONSUMER HEALTH: Long-Term-Care Insurance: New Choice Is Coming

People who dread thinking about long-term-care insurance or find it too expensive soon will have a reason to look again.

For the first time in U.S. history, a public long-term-care program is in the works, part of the health-reform legislation that President Obama signed into law earlier this year. But with many details yet to be worked out, it may be too soon to tell how much impact it will have.

Known as the Community Living Assistance Services and Supports, or CLASS, Act, it's designed to help people plan ahead for when they're disabled or frail and need assistance so they can stay independent as long as possible. It's meant to supplement other funding sources such as personal savings, family caregiving and private long-term-care insurance.

The voluntary, government-administered program -- which will be financed by premiums, not tax dollars -- is expected to work like this: If a company agrees to participate, workers will be automatically enrolled in the program unless they opt out. Those who are self-employed or whose employers choose not to participate will be able to enroll through a different mechanism, but all participants will have to pay monthly premiums for five years, have some kind of employment for three of those first five years and have a qualifying disability before they're eligible to receive the benefit.

The benefit amount is expected to be no less than an average of $50 a day and will depend on the degree of a recipient's impairment. The money can be used for a variety of home-based services, technology and home retrofitting, assisted living or nursing-home care. No medical underwriting is required and there are no lifetime benefit limits.

The Congressional Budget Office estimates monthly premiums will average $123, or about $1,500 a year. The U.S. Secretary of Health and Human Services is expected to set regulations by October 2012, with enrollment beginning shortly thereafter.

Today, many people who need long-term-care services must impoverish themselves before becoming eligible for Medicaid, which is disproportionately oriented towards nursing-home care, said Judy Feder, senior fellow at the Center for American Progress in Washington.

"This is a major advance in terms of protecting people," Feder said of the new benefit. "The ability to rely on the federal government to stand behind this benefit should give people confidence they might not have in other products."

Long-term-care insurance historically has been a tough sell. About 8 million Americans have a private long-term-care policy out of a potential market of 15 million, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, a trade group of insurance agents and brokers, in Westlake Village, Calif.

      An Option For Home-Based Care   

"People don't want to think about it," said Cheryl Matheis, Washington-based senior vice president for health strategy for AARP, which sells private long-term-care insurance through Genworth. "Who wants to buy a product you don't ever want to use?"

Questions remain about the new public program, she said, but it's popular among some Americans over 50 who realize neither private health insurance nor Medicare will cover their long-term-care needs.

"If people are thinking of it as 'I'm buying coverage that will help me stay in my home,' that becomes a lot more attractive," Matheis said. "That's a different equation for people."

Still, some experts are skeptical the new benefit will make much difference. The program could be good for working people who already know they have health problems that would make them uninsurable in the private market, said Stuart Armstrong, a certified long-term-care specialist with Centinel Financial Group in Boston.

But the cash benefit won't be sufficient to cover most people's needs, he said, because home-care aides run about $20 an hour while nurses and physical therapists often charge at least five times as much.

"It's typically not enough coverage for most people, it has a five-year waiting period and it has this work requirement that could be difficult for many couples to meet," Armstrong said.

The upside is the public benefit and private policies won't offset each other, he said, so you'll be able to sign up for and collect from both.

      Will Employers Opt In?   

Unlike the CLASS benefit, individual private policies offer discounts for good health and for spouses or partners, said Slome of the American Association for Long-Term Care Insurance.

"I actually hope CLASS is good and works because having millions of Americans, who have no plan in place, have some plan in place benefits the nation," he said. "It's an important first step."

"The really difficult obstacle is going to be getting businesses on board because it will require an enormous educational effort on their part to make people aware" of the new benefit, Slome said.

Since the program is voluntary, Feder said participation has to be broad and enrollment easy in order to make the insurance pool big enough to work.

Stephen Moses, president of the Center for Long-Term Care Reform, a private outfit in Seattle, doubts the program will be successful partly because it isn't mandatory.

"You have to have a big take-up but you're not going to get big take-up," Moses said, "because CLASS is only a good deal for people who know they will need care."

Insurance firm manager gets 2-yr term for non-compliance

CHANDIGARH: For not complying with its earlier orders, UT consumer forum awarded two-year imprisonment to the manager of SBI Life Insurance Company Limited, Chandigarh. 

Complainant Ajay Wadhwa, a resident of Mohali, alleged that his brother Amit Wadhwa had taken aneducation loan of Rs 3,95,000 from State Bank of India, Mohali branch, and also an insurance cover of Rs 4,00,000 from SBI Life Insurance Company Limited and that he was the nominee in the policy. 

But the insurance company had not sent the policy document either to the bank or to the complainant. The complainant's brother went for his education to Australia on July 2004 and after completing his post-graduation course, he joined a job on April 2007. But in the same month, he met with an accident in Australia and succumbed to injuries. 

Amit and his father had paid the entire loan amount, but the security documents, including original insurance policy, were neither returned nor reported to be lost. Thereafter, a claim of Rs 8 lakh was lodged on May 2007 by the complainant with the insurance company, but it was denied on the ground that the policy had lapsed. Earlier, the forum had directed the respondents to pay jointly and severally Rs 4 lakh along with Rs 4 lakh as double accident benefit and further Rs 2 lakhs as compensation for harassment. Apart from this, Rs 10,000 was to be paid as cost of litigation. 

For not complying with earlier orders, UT consumer forum awarded two-year sentence to the manager of SBI Life Insurance Company Limited and slapped a fine of Rs 10,000. In case the penalty is not paid, 

the manager would suffer further imprisonment for six months, the forum ruled. The forum directed that non-bailable warrants be issued against the manager.