Left hanging out to dry

A mainland-based insurance provider is pulling out of the Hawaii market, leaving residents in Lava Zones 1 and 2 in a tough spot.

Universal Property and Casualty Insurance Co. of Florida announced earlier this month that it intends to withdraw from the state homeowners, condominium and renters insurance market, giving notice to about 1,500 home- and condo owners statewide that their policies will terminate by Aug. 31, 2024.

"We've been in Hawaii for over a decade, but given that we've had limited traction there, and only insured about 1,000 homes, we made a business decision to pull out of the market," said UPC Chief Strategy Officer Arash Soleimani.

William Nhieu, spokesman for the state Department of Commerce and Consumer Affairs, said that roughly 1,000 of UPC's policyholders are on the Big Island, and residents of hard-to-insure areas are in a bind.

"My broker said the only other insurance available to me is state insurance," said Hawaiian Beaches resident Kent Christianson, referring to the Hawaii Property Insurance Association, which provides basic property insurance to those unable to receive conventional coverage.

Christianson said the premiums for his current coverage through UPC is about $1,700 per year. But equivalent coverage through the HPIA would cost about $7,000 or more, which he said is completely unmanageable.

"I'm going to have to get some sort of insurance. The mortgage is going to require it," said Christianson, who purchased a home in Hawaiian Beaches in 2014. "Everybody's going to be dealing with this - everyone south of Ainaloa who has insurance."

Christianson said he will wait for a few months to see whether the situation improves, or if HPIA's premiums drop. But he said that his coverage will expire by the end of the year, and no UPC policies will be renewed after Sept. 1 of this year.

Nhieu said insurance providers have previously pulled out of Hawaii after Hurricane Iniki struck Kauai in 1992, and that major providers such as Farmers Insurance are leaving Florida to mitigate risk in the hurricane-prone state.

Puna Rep. Greggor Ilagan said that in Lava Zones 1 and 2, UPC and HPIA are the only game in town as far as insurance goes. With UPC leaving the scene, the path forward for their policyholders is unclear.

"HPIA's going to be the only option for a lot of folks, but the premiums are very high," Ilagan said. "I've been in contact with the DCCA, the state insurance commissioner, and the people at the HPIA to see what we can do to make the premiums more affordable."

Ilagan said he has several tentative ideas about how to alleviate the insurance problem that could be used to draft bills for the next legislative session, although he emphasized that none of those ideas have been finalized and all still need further investigation.

One possible solution, which Ilagan called "the big one," is a proposal for the state to partially subsidize HPIA, which Ilagan said has been operating in the red since having to pay out about $30 million in claims related to the 2018 Kilauea eruption - claims which, incidentally, caused HPIA's rates to increase substantially for policyholders in Lava Zones 1 and 2.

"But getting that through the Legislature is going to be another matter," Ilagan said, noting that the population of Lava Zones 1 and 2 is small compared to the rest of the state, and that convincing enough lawmakers to support a measure that would subsidize HPIA only to the benefit of a small population is "a nonstarter."

Instead, Ilagan said, any push to subsidize HPIA may have to invoke the looming specter of climate change.

"We'll all need HPIA in the future," Ilagan said. "There's a lot of people living in flood zones."

Other ideas include a more robust consumer alert system to warn policyholders when a provider is leaving, or developing more detailed lava flow models that insurance providers could use to more effectively gauge risk.

Ilagan added that HPIA also could allow policyholders to pay in installments, but said HPIA's computer systems are woefully out-of-date and can't easily handle such a shift without an overhaul. Nonetheless, he said, this solution could be enacted internally, without legislative input.

"We have a bunch of different ideas, and we're still hammering them out," he said.

Ilagan said he hopes one solution or another will coalesce into a bill next year. But in the meantime, the state Insurance Division urges UPC policyholders to talk to their insurance agents about coverage options and to make sure that anyone the customers do business with is an authorized and licensed insurance broker.

"I want to make sure people don't get caught up fraud," Ilagan said. "People are in a bad situation, and I don't want them to be taken advantage of. Do your research before you make any decisions."

Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.