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PCI: Natural Catastrophes Create Fragile Insurance Market in Alabama

Posted on 13 Jan 2012

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The Property Casualty Insurers Association of America (PCI) today published a special report detailing how a rash of natural catastrophes has created a fragile insurance market in Alabama and offering suggestions on how to strengthen it for Alabama consumers.

“There is no question that the Alabama insurance market is in a fragile state right now,” said Monique Kabitzke, PCI’s regional manager for Alabama.

“Increasing losses from hurricanes, tornadoes and other windstorms have forced property insurers in a number of coastal states, including Alabama, to reexamine their business strategies. Because of these strains, PCI encourages Alabama lawmakers to take positive steps that will strengthen competition in the marketplace so that greater coverage access at more affordable prices is provided to the citizens of this state.”

A healthy and durable homeowners market can be achieved by adopting effective legislative reforms, such as the recently passed “Strengthen Alabama Homes” bill intended to help policyholders make their residences more loss resistant. This program is expected to reduce property damage and stabilize insurance rates for consumers.

Other legislative reforms designed to lower disaster costs, help consumers prepare for catastrophe losses and promote the availability and affordability of homeowners coverage include the following:
· Implement and enforce a uniform statewide building code with wind-design requirements for new construction.
· Establish income tax deductions on “catastrophe savings accounts” for homeowners to set aside policy deductibles.
· Provide state income tax deductions on sales tax spent on materials to retro-fit properties.
· Combat insurance fraud by enacting insurance fraud legislation.
· Permit insurers to recoup assessments paid to the state’s Beach Plan.
· Modernize the state’s rate regulatory system from prior approval to flex-rating to ensure greater price stability and a stronger competitive market.
· Provide income tax deductions for consumers whose homeowners insurance premiums are greater than 5 percent of their adjusted gross income.
“It is important to build on the momentum of the Strengthen Alabama Homes program and in so doing, property insurers must be encouraged to enter the market, to attract more business to the state and offer consumers a wider selection of products and prices,” Kabitzke said. “Homeowners must also receive appropriate incentives so they can have greater control of their losses. In this way, working together, we can provide a better, stronger insurance market for Alabama families and bu