What's the deal with insurance coverage in Mississippi?

Opinion

Mississippi’s “brain drain” has long been discussed as a core issue to tackle in reclaiming the state’s vitality and future economic prospects. But an important dynamic is affecting this phenomenon, and its impacts may be less well-understood.

Mississippi is acutely impacted by winter ice storms, spring tornadoes, fall wildfires and summer hurricanes, and the economic fallout from these occurrences are lasting and sometimes irreversible. For Mississippi property owners, the aftershocks are even more pronounced. Ask any affected homeowner, and you’re likely to hear them mention that their insurance premiums have increased over the last several years.

According to industry professionals, fluctuating insurance rates lead to increased premiums. Insurance rates are determined by inflation, reinsurance rates and natural catastrophes.

The property insurance market in places like Louisiana, Florida and California looks drastically different from what we’re familiar with in Mississippi due to those states’ even greater susceptibilities to natural disasters. Major insurance companies have pulled out of these markets, leaving some homeowners with few viable choices to protect their properties. In some areas, annual premiums increased by 33 percent in just three years -- from an average of $1,902 in 2020 to $2,530 in 2023. The biggest increases occurred in zip codes with the highest disaster risk, and these zip codes contain higher non-white populations and lower income individuals.

“On older houses valued at less than $200k, closer to the water, monthly insurance costs can exceed the monthly cost of the house,” observed Amanda D’Angelo at Coastal Realty Group in Gulfport, Miss. “Sellers might have to be willing to accept less money for their homes because insurance costs too much.” To a first-time home buyer looking to establish a long-term residence in the state, this situation can seem untenable. What does this mean for Mississippi families? What does it mean for the next generation? We want young Mississippians to resist the brain drain, but at what cost to them?

Role of the insurance commissioner

In Mississippi, the commissioner of insurance and state fire marshal (the full official title) licenses and regulates the practices of all insurance companies, agents, burial associations, fraternal societies, bail bondsmen and other entities engaged in the insurance business. Mississippi is currently one of 12 states that elect insurance commissioners. Commissioner Mike Chaney lobbied the legislature to make the role appointed by the governor in a bid to “take the politics out” of the role. The bill, sponsored by Senate Insurance Committee Chair Walter Michel (R-Ridgeland), died in the legislature last week.

An increase in insurance costs means that companies are driven to increase premiums to make a profit. Contrary to what some believe about the role of the office of insurance commissioner, it does not set insurance rates, but it does approve recommendations set by the insurance companies. Ideally, the insurance commissioner serves as a buffer between revenue-driven private insurance companies and property owners with few options.

Currently, insurance companies claim that the increases in rates — and therefore premiums — are due to the cost of natural disasters and inflation. However, according to some experts, homeowners insurance premiums rose 40 percent faster than inflation over a five-year period. Appointed or elected, every insurance commissioner is meant to be a representative of the people — not a government official serving on behalf of private insurance companies looking to guarantee a big profit.

House Bill 1534

Rep. Kevin Ford (R-Vicksburg), an insurance agent who chairs the House committee on Accountability, Efficiency and Transparency, authored the Make Mississippi Resilient and Strong Act. This bill would create the Mississippi Windstorm Mitigation Association, to provide financial grants to property owners for retrofitting their properties to withstand severe windstorm events. The maximum grant amount for any insurable property is capped at $15,000. Members of the association are to include member insurers authorized to write property insurance coverage in the state, and non-admitted insurers deemed eligible to conduct business in the state. To recap, admitted insurance companies set rates, recommend those rates to the insurance commissioner for approval, then those rates become a part of property owners’ premiums.

Who are the non-admitted insurers that will be allowed in the Mississippi Windstorm Mitigation Association? They provide what’s called surplus lines insurance, a type of property insurance that covers risks that standard insurance companies won’t cover. Sometimes this includes things like expensive antiques or even golf carts. Surplus lines insurance also covers properties in areas that admitted insurers (think State Farm and Allstate) deem too risky to insure, including in hurricane- and tornado-prone areas. The concern here is that there is no limit to how much surplus lines insurance companies can charge in premiums, and their rates do not have to be approved by the insurance commissioner. It’s a risky deal for consumers to compensate for what insurance companies deem as risky coverage for them.

What does this mean for Mississippi?

Gov. Tate Reeves spends a lot of social media time talking about how great it is to live in Mississippi due to a lower cost of living, an increase in development projects in certain areas of the state, and improvements in public education. As Mississippians strive to make the state a better place to live, it is worth remembering that greatness lies with its people — particularly those who resist the call to leave our home state for the more prosperous locales like Atlanta, Dallas or Nashville. Conservatives have long fashioned themselves as pro-business. The insurance industry and all of its intricacies was not created by the Mississippi commissioner of insurance. However, our leaders must ensure that consumers are protected, and that young Mississippians aiming for their own piece of the “Mississippi miracle” are guaranteed a fighting chance.

As our legislators fight about tax cuts and reduced spending, we can only hope that the savings will stay in our pockets — money we can use to try to establish lives, families and futures in Mississippi — and doesn’t get eaten up by expenses like basic property insurance.

Kelcy Higgins, an Ole Miss grad from Greenville, has spent nearly a decade in progressive politics advocating for reproductive justice and economic equity for all Mississippians.

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Image: photo illustration by Meddy Garnet (via Creative Commons)