Insurance Be Darned

The real sleeper issue for 2007 could be getting homeowner and boat insurance. Not only are insurance premiums rising, but in many cases people are being downright dropped. All the large insurers such as Allstate, Nationwide, Metlife, and State Farm are pulling out of the coastal market, mainly on lowering their risks from hurricanes. All this is despite making billions in profit even taking Katrina into account (Allstate was reported to make 3.71 billion in 9 months of 2006).

All this really doesn’t matter, unless of course you want to buy or sell a dwelling, since the bank must have proof of insurance.

I don’t know if this is an issue on South Padre yet. Anecdotal evidence is that it is not. Some homeowners have been dumped, reinstated, or actually received a discount. A particularly disturbing trend is to watch the deductibles rise from 1 to 2 percent or higher, in site of paying more. Such downward pressure on the market could be a factor in 2007, given the recent "softness" or whatever you want to call the curious condition we see today.

I’m still learning about the industry but one feature that bothers me is that if a claim is needed, it will pay out minus deductible but the original value of the dwelling when the policy was set, and not reflect the ever-rising prices of Island property. So if you bought at 100K but needed to rebuild at 250K, well, that’s too darned bad. You just got a one-way ticket over the Causeway.

The problem started in coastal Florida and is making its way up the East Coast and down the Gulf Coast. Boat sales are reported to be extremely slow in Florida, a major boat building region, since nobody can find insurance (Progressive will write some policies for boats less than 26 feet but has tripled its prices). It appears that the insurance industry could end up setting coastal policy more than any other thing, unless something shakes loose - and hopefully not a big hurricane.