When It Rains It Pours
Following two years of one hurricane after another, Louisiana homeowners face insurance struggles.
Over the last few months, five homeoners insurance companies in Louisiana have become insolvent, and many others have pulled out of the state — discontinuing all of their policies at the end of their coverage period.
According to Jim Donelon, commissioner of insurance for the state of Louisiana, high premiums and insurance company failures are the result of three factors. “The first is that global markets are experiencing increased catastrophe losses and driving up the cost of reinsurance, which makes it harder for insurance companies to cover their risk and increases the cost we all pay in our premiums,” he said. “The second is the catastrophic property damage losses we experienced in Louisiana following hurricanes Laura and Ida.”
Inflation has also dramatically increased prices for roofers, suppliers and other contractors, exacerbating this issue.
“The third cause is that many homes are underinsured, and premiums go up when insurers adjust the insured value of a home to a more accurate replacement cost value,” Donelon said.
After a succession of major storms in 2020 and 2021, the warnings of an especially active Atlantic hurricane season this year hasn’t helped matters.
“Hurricanes Laura, Delta, Zeta and Ida generated approximately 800,000 property insurance claims and resulted in $25 billion in paid insurance losses,” said Jeff Albright, CEO of Independent Insurance Agents & Brokers of Louisiana. “Many insurers have had all the fun they care to have in Louisiana after these four hurricanes.”
Adding to the pain felt by homeowners now left scrambling, many who have switched carriers have found themselves paying more for the same coverage.
“Fewer insurance carriers are willing to write in Louisiana,” said Chuck Stall, a realtor at GNO Realty. “Some of the reps I have talked to say this is the worst they have ever seen it.”
Albright said the Louisiana homeowners insurance market will likely be in crisis for several years.
“If we are lucky, and don’t have any major hurricanes for a few years, the property insurance market can recover and insurers will begin writing new policies again,” he said. But if we continue to have multiple major hurricanes, insurers may not return — and more may leave.
Currently, the state is doing what it can to help tide people over and provide coverage until the market recovers. The vast majority of canceled or nonrenewed policies are now being written by Louisiana Citizens. Donelon said those whose insurance policy was canceled will be covered by Citizens for claims that occur between their cancellation date and the date their agent solidifies a new policy.
Policyholders need to review their insurance so they understand what their policy does and does not cover. Hurricane deductibles, also known as “named storm” or “wind and hail” deductibles, are typically between 2% and 5% of the insured property’s value, with about a third of our state’s policies having a 5% hurricane deductible. This means that if your home’s value is $200,000, you would be responsible for paying your $4,000 to $10,000 hurricane deductible before your coverage kicks in.
Jim Donelon, Commissioner of Insurance for the State of Louisiana
Independent Insurance Agents & Brokers of Louisiana
If policyholders have a good homeowner’s insurance policy with a major insurance company… keep it. There are no good shopping options to find better insurance. If not, rest assured that Louisiana Citizens is a good alternative until the market recovers and insurance companies begin writing new policies in Louisiana again.
Work with reputable companies. Sometimes if it seems too good to be true, it may be. Document your home and belongings as we are heading into hurricane season. With smartphones it is easier than ever to shoot video and upload it to any cloud-based platform. That way if your phone is damaged in any way during the disaster, you have those files uploaded and safe. Not only will it help your carrier with your claim, but it could help your builder put it back properly.