Insurance Rises Along Coast

A special state commission on homeowners' insurance is releasing its recommendations to the legislature tomorrow. The panel was formed this past summer to investigate rising premiums along coastal Massachusetts.

Since 2004, tens of thousands of property owners have lost their private insurance. Many have moved onto the Massachusetts Property Insurance Underwriting Association, commonly known as the FAIR Plan. That's the state-regulated insurance policy of last resort.

WBUR's Kezia Simister has more on the story.

TEXT OF STORY:

KEZIA SIMISTER: Moving to Cape Cod was a dream for Susan Silver. She's a retired nurse and relocated here from New Jersey eleven years ago when she and her husband bought a modest two-bedroom ranch in Eastham. Silver is sixty-six, she volunteers in the community and her husband works part-time as a guidance counselor to pay for the "extras" — like gifts for the grandkids.

At a small table in her living room, Silver shuffles through a pile of paperwork.

SUSAN SILVER: We got a letter from Quincy Mutual that told us our policy no longer met the company's underwriting standards. The risk has an unexpected exposure to hurricane lose, was their explanation, and they are terminating our policy.

KEZIA SIMISTER: The Company declined to go on the record for this report. As of last year, Silver is on the state's FAIR Plan and paying eighty percent more.

SUSAN SILVER: We're about at our limit of what we can afford to pay for homeowners insurance. Do we go out and get a job to pay for this? We're retired. We worked hard to get what we have. And I don't want to lose this place. I don't want to move someplace else. We planned out whole lives around this. I really feel stuck.

KEZIA SIMISTER: And she is stuck. She may be able to shop around and find a private company to insure her house, but her options are limited. Private companies that still cover homes on the Cape have raised their rates by almost 300 percent since 1999. And the state administered FAIR Plan says its rates need to be higher as well. All insurance companies must participate in the plan and the state insurance commissioner approves its rates.

Currently, the FAIR Plan insures forty percent of Cape Cod homeowners. And it is requesting a twenty five percent rate increase, the second in two years, for policies on the Cape, the islands, New Bedford, and Plymouth. But, Jack Golembeski, President of the FAIR Plan says it's the cheapest option for coastal homeowners.

JACK GOLEMBESKI: Other insurance companies have either reduced exposure and writings in this area or they have significantly raised pricing well above where the FAIR Plan is.

KEZIA SIMISTER: The FAIR Plan also insures properties elsewhere in the state. Inland residents could see a fourteen percent increase next year.

Some Cape residents are so outraged that they formed an activist group - Citizens for Homeowners Insurance Reform. Four thousand people have signed up so far.

And recently about thirty members from the Cape, mostly seniors, took to the street for a silent protest in Copley Square. The group's founder, Paula Aschettino, chose this location because of its proximity to a national insurance trade group's annual meeting.

PAULA ASCHETTINO: we are hear to let the industry, our legislature, the government, and the commissioner know that the Cape, the islands and coastal MA is not going to sit back and put up with these practices any longer.

KEZIA SIMISTER: They complain the insurance industry is using confidential storm modeling to justify rising rates. Protestor, Barbara Perry, who, like other protestors, says companies are using models based on Florida's coast, not the New England shoreline.

BARBARA PERRY: It is actually skewed toward profit making and they patently refuse to share it with the public the model on which they base their rates.

KEZIA SIMISTER: Insurance industry executives say New England overdue for a catastrophic storm. Frank O'Brien is the Vice President of the Property Casualty Insurers Association of America — the group meeting across the street from the protest.

FRANK OBRIEN: Modeling companies in some cases have said they are not willing to release some of the innards of the storm models because they are proprietary and it is a competitive business.

KEZIA SIMISTER: Hurricane forecasts have caused the cost of reinsurance - insurance bought by insurers to protect their losses — to skyrocket. Private companies and the FAIR Plan pass these costs onto consumers.

Attorney General Martha Coakley says she has yet to see storm modeling documentation that supports a rate increase. Coakley is suing the FAIR Plan and the division of insurance for last year's rate hike and recommending a twenty nine percent decrease in FAIR Plan rates to make up for it. She says the plan is making a profit by taking advantage of ratepayers.

ATTORNEY GENERAL: We believe that there has been an overcharging for reinsurance costs as well as an overcharging, built in overcharging in the new rates for predicated hurricane losses that is based upon a model that is not appropriate.

KEZIA SIMISTER: The Insurance Commissioner is expected to make a decision in the new year whether to decrease rates as the Attorney General wants or increase rates as the FAIR Plan administration requests.

KEZIA SIMISTER: Higher premiums are not what Susan Silver wants. The Eastham resident says three of her friends have already moved because of mounting insurance costs and many of her neighbors have lost their private coverage.

SUSAN SILVER: My neighbor just bought that place less than a year ago across the street and the only option was FAIR Plan. It's the talk. It's a big problem here. And people are uneasy.

That's one reason why the state formed the Homeowners' Insurance Commission, which is due to deliver its legislative recommendations tomorrow. Commission members have indicated a few ideas — among them are changes to the FAIR Plan, creating public storm models, and replacing reinsurance with a state run catastrophic event fund.

For WBUR, I'm Kezia Simister.