Editor-at-Large | Jim Leutze | Sharing Costs For Coastal Insurance

Sharing Costs For Coastal Insurance — And Athletic Scholarships

By Jim Leutze

I have mentioned that something big happened regarding coastal insurance; now this isn’t going to be simple, but at the end I hope you’ll say, “I got it.” You may also say that the unusual statewide approach is a good one and might well be applied more broadly.
Several years ago insurance companies doing business in North Carolina decided to set up a Beach Plan to provide wind and hail coverage. The Plan was actually a pool contributed to by all insurance companies to be the “insurer of last resort” for coastal homeowners. If you couldn’t get wind and hail insurance through your homeowner’s policy — and you couldn’t — you bought it through the Beach Plan. This approach allowed insurers to share the risk in case of a catastrophic storm event. Eventually, the pool’s reserves for paying claims grew to $2 billion. But at the same time, the possible costs from a big storm went up as well. In the event that there was a $4 billion storm, all of the insurers would have to make up the missing $2 billion in proportion to their share of the total market. (If their share was 20 percent of the market, they would need to come up with $400 million.)
This didn’t sound good to the insurance industry, so they proposed raising rates on coastal homeowners by as much as 75 percent. This didn’t sound good to coastal homeowners who howled. The response was a threat by some of the insurance companies to simply stop doing business in North Carolina. This didn’t sound good to the General Assembly, which quickly (or as quickly as they do anything) got to work on a new approach.
The new approach has a new name — the Coastal Property Insurance Pool. Under this plan, all homeowners in the state will share in the cost of rebuilding the catastrophic storm event pool after the insurance companies have paid out more than $1 billion in claims. There will be other changes, like limiting coverage to $750,000 rather than $1.5 million, but the big thing is the novel concept that all North Carolinians should share in the cost of something happening in one part of North Carolina. It was former Gov. Mike Easley who made addressing the issue of the “Two North Carolinas” — one rich and one poor — a major theme during his first campaign. (Not much changed, but it was a catchy slogan.)
And it was current Gov. Beverly Perdue who pointed out that if the North Carolina counties east of Interstate 95 were a state, it’d be one of the poorest in the country. However, the idea never really caught on. Judge Howard Manning had pointed out that North Carolina was in violation of a constitutional provision that all our public school students should have “equal access” to education. Clearly, that isn’t the case when some urban counties can invest so much more in their schools than their poorer rural neighbors. To show he’s serious, Manning has now ordered the state to take over the management of the schools in Halifax County, one of our poorest.
Well, to me, the Coastal Property Insurance Pool is an equally dramatic step. We are, after all, one state. The air quality problems in our mountains are a state problem. The water problems in the Piedmont are a state problem. The beach renourishment problem is a state problem. Let’s begin looking at things this way for, as Ben Franklin once said, “We’d better all hang together or we’ll surely hang separately.”

Taxpayers Bear Cost For Out-of-State Athletes
You probably have heard about the nice gift the General Assembly is giving the athletic boosters at UNC schools. At this writing, the House has voted to suspend the program, but the Senate, where there is big support, still has not acted. I’m talking about the more than $8 million you and I are picking up for out-of-state athletes. That $8 million is the difference between the tuition that the booster clubs would have to pay if the out-of-state athletes paid out-of-state tuition rather than in-state tuition. Some people feel that this kind of largesse is particularly egregious when our public schools are in such financial difficulty. One legislator defended the practice in a News & Observer article by saying the program was particularly helpful to our Historical Black Colleges and Universities (HBCUs). Umm, let’s see — the HBCUs got 73 of the athletic grants; UNC-Chapel Hill, alone, got 111, Appalachian got 85; NC State got 114; Western Carolina got 65, almost as many as all the HBCUs.
Now, instead of wringing my hands like so many others, let me make a modest and hopefully conservative proposal. Why not require that those “public scholarships” carry a requirement for academic achievement? Maybe we could expect our out-of-state athletes to have a 3.0 high school grade point average, to maintain a 2.5 in college and take the courses required to graduate in 4.5 years (the current national average). We might also require that if they go professional before graduation, they pay the state back. And, if we really want to help the HBCUs, let’s give them the funds as merit scholarships so that they can attract more high-performing students.