Monday, July 19, 2010

Something to "Beach" about

I received a piece of mail from my the insurance company that we use to insure our home over the weekend. Of course it was over the weekend: the powers that be can never manage to get a single item of any real importance into my mailbox during the work week. Any item that has potential to cause confusion or stress will always arrive in our box on a Saturday. I'm just sayin'...

Anyway, I open this piece of mail from my insurance company. It broke down certain coverage limits, and proposed a premium that was more than 20% higher than the previous year, thus setting it at nearly 9% above the "bureau premium". The title of the page read "Consent to Rate Form" regarding our home. Consent to rate? What does that mean?

Well, here in NC, insurance rates are set by a "standards bureau": no doubt some room full of overpaid, underworked drones down in Raleigh who will introduce themselves to you by listing off all of the "important" people that they know, rather than spouting off any information of real value. So anyway, these folks down in Raleigh, they set a limit for how high insurance premiums can be for various assets. However, that doesn't mean that the insurer is bound by this limit. Instead, it simply indicates that if the insurer wishes to essentially overcharge you (per the state's standards), they must then send you a "consent to rate form", informing you in writing that they are bending you over, and asking you to sign, acknowledging that your policy is going to cost you more, but yet, you want it anyway.

Naturally, I found this pretense to be intriguing. We hadn't filed any claims, built an addition, or teleported our home into a flood plain. I couldn't understand why the premium would jump like this. But of course, I had to wait until Monday to call. So, this morning, bright and early (thanks to my youngest child's innate quality of rising as soon as the sun breaks over the horizon), I got on the phone and called my insurance guy.

Yep, that's right: I have a "guy". In this day of internet and technology, I am aware that it is possible to purchase pretty much anything from someone whom you have never met, or even been in the same state with. But I have a personal philosophy that requires me to act in what has become a rather old fashioned manner. I have insured my cars by phone and internet, sure, but see, my home is my most valuable tangible asset, and my health (and the health of my family) is my most valuable intangible asset. The home cost more than anything else that we own. It houses my most valuable possession: my family (not to mention the massive amount of stuff that we've accumulated and would want replaced come hell or high water). It's safe to say that without our home, we'd be in pretty bad shape. And as for our health, well, our health is our vitality: in the absence of health, life loses some of it's luster, wouldn't you agree? So, anyway, knowing those two valued items, I like to buy my home owner's insurance and my health insurance, from someone whose face I have seen, and who has seen my face. Someone who is a member of my community. Someone who will recall who I am, should I have to call with a question, or a concern. And most importantly, someone who, should I actually have the need to file a claim against my home owner's insurance, or look into having some sort of quality of life saving surgery under my health insurance policy, has a home that I can locate. Someone who knows that the place where he and his family sleep at night is easily determined. I think that having some sort of familiarity with the folks you do business with can not be overrated. It's important, wouldn't you agree? Folks tend to respond differently to their clients when they know that YOU KNOW that they are not only in the same state, but in the same city as you are, and that they can easily be found behind the same desk Monday through Friday. It just adds a little something special to the relationship that I can't likely get from some guy reading from a translation guide across an ocean or two.

Either that, or it's the Italian in me talking.

Anyway, I played phone tag with him for a minute, and eventually got in touch with him. He said he knew "exactly" why I was calling. And he did. Seems many folks up for renewal were calling about the same form, and that there was a lot of "confusion" about it.

And then he explained to me what was happening.

Last year, our douche bag "representatives" down in Raleigh, looking out for "our" best interests, of course, had ratified changes to a 40 year old bill known as "The Beach Plan". The Beach Plan was initially designed to make insurance rates affordable for people living in 18 counties near the coast. Undercutting capitalism, the Beach Plan offered property owners in areas deemed to be at high risk for wind damage another option to private coverage (which had the discretion to not write policies for higher risk areas). Oftentimes the Beach Plan offered policies that were more attractive than those available from private companies (read: cheaper); and the policies are underwritten by the State of North Carolina. It was an effort to guarantee residents on the coast access to adequate property insurance, in the hopes of preventing destroyed homes from cluttering up the tourism dependent coastal region. It was essentially a subsidized insurance plan that protected people living in those expensive homes (or sitting on valuable property) at the beach from paying fair market value for their property insurance.

So what's the problem? It seems like a sweet deal for those people who own gorgeous vacation homes at the beach, renting for $3000 a week during the summer: they get property insurance at subsidized rates, while those of us who live further inland pay an assessment fee on our own policies to fund the pot that will help pay for their damages, if and when a storm hits. But every rose has it's thorn. In selling such attractive policies for such high risk properties, someone responsible (read: PAID) managing this fund eventually ran the numbers, and realized that the state was coming up short. Way short. Estimates put the Beach Plan's resources at less than 3 billion, far less than the $74 billion dollars in policies that were held. Quite the discrepancy, wouldn't you say?! Now, I'm no mathematician, but if I'm running numbers, even every so often, and for the sake of argument, let's just say we do it every year, and I'm coming up short, I think I'm going to notice the deficit before it tops 70 million. But apparently, someone was sleeping on the job down there in the Oak City, and it took them a fair while to catch up.

So here we are in North Carolina, and the guys in the poly suits down in the capital realized that they were in a pinch for cash. What would the state of North Carolina do if a storm swept through and devastated the coastal communities? Here they are insuring all of these properties, but lacking the assets to cover them. Shady business plan, if you ask me. I doubt that they'd get the AAA insurance rating with tactics like this. But hey, I also don't have an MBA, so what the hell do I know.

I'll tell you what I know. I know that I don't own any property at the beach. I know that when I purchased my home, one of the things I looked at before I signed on the dotted line was how much my taxes and insurance were going to cost me. What's more than that, I know that if I lived in a home that suddenly became too expensive to insure, I'd put that puppy up for sale. And I know that even though my own insurance policy for my home in a low risk, inland area went up 20% to cover some douche at the beach's property that I'm not even going to get to stay at. A lot of those properties are investment properties: These home owners are making a killing while purchasing an insurance policy that is subsidized by every property owner in the state of North Carolina. And those of us who live inland are getting the shaft.

Oh, but what about the poor people who live in old, run down housing in these high risk areas: how can they be expected to stay in their home, and to continue to be homeowners, if the cost of insurance is out of their reach? Well, those people are free to sell their property at any time and relocate to homes that they can afford, because home owner's insurance is part of the cost of ownership when you invest in a home. And no one is forcing them to live there. Never-mind that these same people could probably make a hefty profit by selling their great granddaddy's shack to some willing investor who can actually afford to insure the property adequately. But, rather than enforce the notion of responsible homeownership, socialism put its ugly arms around the insurance industry, too.

So that leaves me, and millions of other North Carolinians, paying for insurance on homes that we don't even sleep in, and businesses that we won't be getting any profit sharing checks from. And North Carolina further solidifies itself as #9 among the states with the highest tax burden.

And those "representatives" that we stuck down there in Raleigh-- they'll be sitting pretty in their vacation homes down at the coast, partially insured by their constituents.

Maybe I'll call a few of them and see if I can get a discount for a week at the beach this summer... seeing as how I'm essentially pitching in for the cost of the property anyway.


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