The heat is on over home insurance skyrocketing rates

Cape Codders demand reform for Homeowners Insurance Rates
Everything you want to know about your rates (but are afraid to ask) 

Special to cctoday by Diana Woebcke

How many State officials does it take to reduce homeowners insurance rates on Cape Cod? 

The answer is six, but the number may need to go up.  And the rates may never go down. 

Increases in homeowner's insurance rates are what has many Cape Codders as hot as asphalt in mid-July.  On May 5th, 2007 a panel of Massachusetts State officials met an emotional audience at Cape Cod Community College Tilden Arts Center The Forum for Homeowners Insurance Reform organized by PaulaAschettino, founder of Citizens for Homeowners Insurance Reform, CHIR, attracted about 500 Cape Codders.  

In attendance at the days forum was Daniel Crane, representing Governor Patrick and Insurance Commissioner, Nonnie Burns; Jeffrey Clements representing the Attorney General, Martha Coakley.  Jack Golembeski, President of the FAIR plan; State Senator Robert O'Leary; State Representatives Sarah Peake and Cleon Turner; Frank Mancini, President of the Massachusetts Association of Insurance Agents, and Steve D'Amato, a consultant with the Center for Insurance Research.  Paula Aschettino began the forum with an introduction to her organization and hope for reform.  

Aschettino, a long time resident of Truro and founder and chair of CHIR was dropped from her insurance in 2003, when many insurers stopped writing for Cape residents.  Her new company raised her rates 100%.  Outraged, she decided to make calls and get signatures.  She obtained more than 400 signatures.

Eventually she started CHIR.  The organization is currently lobbying for more regulations and reform for the Cape's home owners.

Jack Golembeski, president of the FAIR plan, an acronym for Fair Access to Insurance Requirements,opened with boo's from the audience.  He claimed the FAIR plan has the lowest rates on the Cape.    

The audience disagreed.

Golembeski said his company's profit for 2005 was 33 million. In 2006 it was 48.5 million.  He said all profits are in an investment account and readily available to clients in the event of a hurricane. Now, according to Golembeski, with 155,000 Cape policy holders and 190,000 State wide, they have substantially raised their rates and residents are unhappy.  FAIR Plan increased its premiums in October 2006 by 25% and is currently under review for another 25% increase.   

The FAIR plan was created in the 1960's.  FAIR plans exist in 33 states and through legislation, offers insurance to properties considered to be "high risk" by underwriters: inner city, urban areas; high risk areas for fires; and coastal properties such as Cape Cod.  In the wake of Katrina, and what re- insurance companies see through the use of models as potential rising risk of hurricane landfall frequency and intensity, Cape home insurance costs have mostly tripled in the last 3 years. 

Cleon Turner  challenges "affordability", O'Leary wants a lock

With rising premiums, affordability is now becoming an issue, as Representative Cleon Turner pointed out.   "No bill currently in legislation addresses the issue of affordability."  

D'Amato, representing the Center for Insurance Research, also feels strongly the commissioner should try "to make insurance affordable to the public."

O'Leary's bill currently in legislation, The Catastrophic Event Fund, reimburses private insurers for a portion of insured losses sustained as the result of a hurricane.  Instead of insurance companies buying re-insurance, money accrues in a State fund over 7-10 years, increasing in interest at the rate of 15 million over 2 years.  It would increase competition necessary for  a healthy market. 

The plan would also lock rates for two years and establish a tax free corporation made up of more State officials.

"There is a new governor, new administration and a new insurance commissioner. People should take advantage of that, get to know them and let them know what you want" said Steve D'Amato.  In 2005, he and some colleagues noticed changes in Massachusetts insurance law.  His company warned the public of future increases in premiums as a result of these laws.  He says some defects in the FAIR plan are "the fact they do profit, the voluntary market profits and the plan does not take into consideration loss ratios. 

Loss ratios are very relevant to homeowners insurance."  In other words what they pay out is low in relation to what they take in in reserve.

Models are used to determine premiums and rates and "should be made public"  according to D'Amato.  He insisted, "If they don't make the information public, they should not be able to use them."  This was met with a round of applause from the audience.  Many of the panel members agreed as well. Frank Mancini, President of the Massachusetts Association of Insurance Agents said,  "We do want to see inside the black box, (models) and know what's going on." 

What now appears to be speculation has many consumers worried about models and their levels of accuracy.  O'Leary wants to "require State agencies to tell us if they are reliable. I am not sure they are."   According to Golembeski they are reliable. They include the AIR, AMS and ECO Cat model. "One is high, one is low and one is in the middle, that's how we like it." They are also frequently updated.  Currently, the FAIR plan needs to sign a waiver not to disclose any information about them models the use.

Audience members questioned panel members asking them to go outside current models and use our States and Universities form rest of the country: UMASS, Colorado State, FL State all have trusted and valued weather departments able to produce reliable data on potential wind activity in the area.  

Faulty hurricane projections cost Cape big time

John Beckerly, a retired Theoretical Physicist, who studied hurricanes as a professor, explained to the panel the reason Cape Cod is at low risk for hurricanes. Because the temperature of the water in the Northeast is colder than the South, most hurricanes loose intensity or drift out to sea. "Hurricanes South of Cape Cod go eastward, very few
cross Cape Cod,"

John Land a Brewster resident for ten years said, "There is nothing to justify nefarious models, they are only as good as the information that goes in them." "Freezing rates is not enough, we also need to reduce them."   He challenged panel members to roll back rates this year. 

Rita McCarthy, from the TNRTPA or Truro non-resident Tax Payers Association, is concerned about residents in Truro keeping multi-generational homes. "We don't get wind, we get water." 

Insurance companies don't want to cover water damage. O'Leary replied, "It's a coastal issue. We don't get a lot of sympathy from off-Cape. People (in the Boston area) don't realize they pay into the (FAIR) Plan." He stated the FAIR Plan is "too high" and "the models are too industry friendly."

If you won't insure Cape, you can't insure state

There is also a bill asking for all insurance companies who write in Massachusetts to be required to write insurance for Cape Cod. Hearings in Boston started two weeks ago and will continue for the next 4to 5 months.

 The Insurance Commissioners job is to determine if the rate increase is "excessive, inadequate or discriminatory."  Public opinion is also taken into consideration at the hearings.

Cleon Turner says, "We're working as a team...make sure your voice is heard."  

  • For contacts for homeowners insurance reform got to the CHIR website and click on contacts.
  • To view a bill currently being reviewed go here,

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