Need a new insurance policy for your island home? Forget it. You’re just too risky, out there in the bay.
Both islanders and insurance agents say if you’ve got a policy already, it may be escape being canceled. But if you’re starting fresh, the industry won’t touch you. Maine island life hasn’t suddenly gotten more dangerous, but insurance corporations are tightening their belts, and island properties are off their diet.
“As independent agents, we’re trying to our best for our customers,” said Bruce Bicknell of Robinson insurance agency in Southwest Harbor, which has insured many island properties for years. “But in some cases, we have to say, there is nothing we can do for you.”
Insurance companies are themselves backed up by bigger firms, such as Lloyds of London, and those corporations are refusing to risks they used to cover. Bicknell cited the 2001 terrorist attack on the U.S. and the nation’s economic slump as the biggest reasons for dropping riskier policies – islands included. Most islands have only minimal fire protection, and are constantly subject to storms and the occasional hurricane.
Reconstruction costs are traditionally much higher on islands, where building supplies and workers must often be transported from the mainland.
One owner of an expensive island property is paying $10,000 per year for his homeowner’s policy, Bicknell said, acknowledging such a premium is way beyond most people’s ability to pay. One option is the so-called “excess lines” market, involving unconventional policies offered by certain companies, typically for higher premiums. Bicknell said a policy to protect a $150,000 home, for example, could cost $1,500 though an excess line.
“What we’re trying to do is make sure all of our existing (island) customers don’t get canceled for any reason,” he said. State law backs him up. If you pay your premium, an insurance company cannot cancel your existing policy. But it could raise the rates beyond what you can afford.
Gerd Hasal, a former Frenchboro selectman, said his former carrier jacked the rates on his island homeowner’s policy, even though he has never filed a claim and has a good credit rating. Finally, through an agent, Hasal was able to buy some fire and windstorm protection through another company, a reduction in coverage but more affordable.
He conceded the reduced coverage might not be a big problem, since “we don’t have any vandalism and certainly don’t have any theft.” But he complained that young fishermen trying to remain on the island face “outlandish premiums” for insurance. If they have a mortgage, the bank requires the property be insured.
Hasal serves on the board of Frenchboro Future Development Corporation, a project supported by the Island Institute. Several affordable houses sold through the program almost lost their insurance. He said new owners were only able to hang onto a policy by arguing the property was already insured under corporation ownership, and coverage should continue.
The unavailability of insurance isn’t just at the lower-income level. Hasal is caretaker for a high-end estate on Frenchboro, and the owner finally obtained coverage through Lloyds of London – after being rejected by the Chubb insurance company.
Rep. Hannah Pingree (D-North Haven) said she is concerned about the difficulty of getting island property insurance, particularly at Frenchboro. The decision by insurance companies to stop writing new island policies is “incredibly frustrating,” she said.
Dave Cole of Waldoboro, an agent who has insured islanders for 24 years, said the big companies he represents are now refusing to write policies for people with seasonal or year-round island property. “It costs a lot of money to adjust a claim on an island. It costs so much to fix and repair damage.” Nobody argues that doing work on an island isn’t more expensive, but that’s nothing new. What’s new, said Cole, is that the insurance industry wants to recoup money it paid out after the attack on the World Trade Center; it wants to recoup money it has lost in a sinking economy. “What the companies don’t tell you is, they lost a lot of money in the stock market,” he said.
Some insurance companies won’t write a policy for an island even if it’s only 1,000 feet from the mainland, Cole said.
Austin Childs, of the Pease Agency in Rockport, said he rarely turns customers away. He will try hard to find a policy for the island customer, even if it has to be through the excess lines market. He said the terrorist attack was a fluke. Major forces in the insurance industry include a history of selling policies with lower premiums – thus increasing the number of claims from sheer numbers of those insured – and the depressed economy. He doesn’t see things changing anytime soon.