Opinion
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Beach Plan
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Published: August 25, 2008
With the decision by Farmers Insurance to pull out of North Carolina, 40,000 families in our state must suddenly find someone to insure their homes, some of them within only a few months.
If North Carolina doesn't reform its beach-insurance plan before the next big storm hits, many more homeowners, including those who live inland, may face either the same problem or much higher insurance rates.
So far this hurricane season, we've been lucky. But history tells us that luck is not on our side. A major hurricane will roar up the Atlantic Coast and hit us. When it does, $75 billion worth of property either on or near the waterfront will be vulnerable.
We've seen the destruction Hurricanes Andrew and Katrina did to big portions of Florida and the Gulf Coast respectively. Now the insurance industries in those states are very tight, and affordable insurance is hard to get for everyone, not just those who live in beachfront luxury.
North Carolina has a "Beach Plan" that offers insurance to property owners in 18 counties. It's a plan of last resort for those who can't get regular insurance. But insurance officials say too many property owners use it as their only option. The plan has the ability to cover only $2.5 billion in damage.
Here's the concern. When the big one hits, the plan will be drained unless we reinforce it. (And, of course, unless we get lucky and the big hurricane doesn't come for several years.) If the plan were to be drained, all insurance companies would get charged assessments to cover the additional claims. Those assessments would knock some smaller companies out of business and so damage others that they would leave North Carolina.
Farmers Insurance left before the big one got here. In all candor, we're surprised more companies haven't done the same thing.
The General Assembly, after years of neglect, is looking into the Beach Plan and will likely have a package of proposals ready for next year. Two elements are absolutely essential, in our view, to any such reform package.
The first is that property owners in the most vulnerable areas must be charged higher rates to bolster the Beach Plan. Higher rates will allow the plan to accumulate greater reserves.
The second is that building codes in coastal counties must be stiffened. With better construction, we can avoid a good bit of the damage of a hurricane.
The 2008 campaign offers North Carolinians a chance to pick a new insurance commissioner. Although this is a down-ballot race, it is one that will greatly affect the wallets of all of us, not just those with beach property. We should be pressing the candidates for their ideas on reforming the Beach Plan and pressing legislative candidates to adopt a new commitment to the issue in 2009.
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