Coastal and island property owners feeling the pinch of increased insurance premiums and inadequate access to insurance may be in for some relief.
A number of proposals before the Maine legislature address challenges associated with finding adequate insurance coverage for Maine property owners. Market forces may help as well. “We are beginning to see a decline in the number of hearing requests for non-renewal of homeowner insurance policies,” said Alessandro Iuppa, Superintendent of the Maine Bureau of Insurance, “which may indicate improved opportunities for consumers who are seeking coverage for their properties.”
The difficulty of obtaining property insurance for coastal and island property is a result of stricter underwriting by insurance providers. According to Iuppa, “When [insurance] companies tighten underwriting, they go after the most obvious risks.” According to a recent report by the Bureau, these risks include a location within 1,000 feet of the water at high tide, location less than 35 feet above the high-tide line, and exposure to the ocean and wind. In addition, seasonal properties that are vacant for prolonged periods are more difficult to insure.
Several factors contributed to the current state of insurance market, which has affected not just coastal and island property owners, but property owners across the country. Insurance companies experienced underwriting losses throughout the 1990s, but they were able to cover these losses through investment income. The downturn of financial markets combined with the Sept. 11, 2001, terrorist attacks reduced the ability of insurance providers to cover future losses at prevailing premium rates and led to a tightening of underwriting policies nationwide.
While the insurance market historically cycles through periods of soft and hard markets, the current market and its impact on Maine property owners has raised concern among state lawmakers. According to state Sen. Chris Hall (D-Bristol), “We’ve been tracking this issue for some time and believe there are a number of things we could and should do on behalf of Maine residents to make sure that they continue to have access to reasonably priced property insurance.”
Current legislative proposals include LD1601, “An Act to Authorize the Superintendent of Insurance to Establish a Fair Access Insurance Requirements Plan.” This bill proposes the establishment of a program that would make residential property insurance available to homeowners in underserved areas who are unable to obtain insurance through the voluntary market. According to Superintendent Iuppa, this plan could help property owners during tight insurance markets.
Another proposal, LD1853, initiated by Governor John Baldacci, will help property owners who face the potential of nonrenewal based on the need for property repairs. In the current marketplace property owners have 30 days to make necessary repairs; however, the governor’s proposal would extend that timeframe to as much four months. The governor’s proposal also prevents insurance providers from denying coverage solely on the basis of the age of the dwelling or on the basis of claims from previous owners.
Regardless of the outcome of the current legislation, Superintendent Iuppa advises coastal and island property owners who are seeking insurance to shop around and consider consolidating homeowners, auto, and other insurance plans with the same carrier. If all else fails, property owners might consider higher deductible policies or the excess lines markets.
For homeowners who have been dropped by their insurance companies, Iuppa strongly encourages filing for a hearing with the Bureau of Insurance within 30 days of receiving a nonrenewal notice. He notes that “statistically, individuals who request a hearing have close to a 70 percent chance that their claim will be upheld or policy reinstated.”
The property and casualty insurance report can be found on the state insurance bureau’s web site,