Louisiana homeowners, insurers see premiums rise amid market ‘crisis’

The homeowner’s insurance market in Louisiana is growing. The number of insured is decreasing. And the prices, once fixed, just seem to go up, up and up.

Just ask Ryan North of Metairie, who relied on Lighthouse Excalibur Property Insurance Co. until the company collapsed earlier this year.

First, he received information that another company would take over his policy. Then, the company backed out at the last minute.

He was able to get a new policy with Lloyds of London, but it came at a high price, and there was nothing to like about it.

“I went from having great coverage with a $1,000 deductible to $4,000 a year, to having $9,000 in deductibles and paying $5,000 a year, with no coverage at all,” said North, a former architect.

The northern scene is similar to southern Louisiana, which has been hit by several hurricanes in recent years. Having been hit with hundreds of thousands of claims that cost billions of dollars, insurers are now making a comeback.

Seven companies filing policies in Louisiana have failed. At least a dozen companies have submitted notices of withdrawal to the Department of Insurance, a necessary step before leaving the government. As a result, thousands of homeowners are forced to rely on the state’s last insurer, the Louisiana Citizens Property Insurance Corp.

On average, homeowner’s insurance rates will increase by 6.7% statewide in 2021, according to LDI. This was three times larger than the 1.9% average rate approved last year, officials said. Data for 2022 is not yet available, but many landlords and brokers have reported an increase.

The market is so bad that Insurance Commissioner Jim Donelon has called the current situation a “crisis”. He is holding a conference at the University of New Orleans at 6 p.m. Wednesday to discuss “the rising cost of insurance” and the recent failure of the industry.

At a recent press conference at the Press Club of Baton Rouge, Donelon wanted to sound optimistic, saying there are options for homeowners if they shop around.

“There are alternatives out there,” he said, “(but) they’re hard to find.”

Homeowners, insurers and brokers say the market is being restructured in other, less obvious ways as companies change the guidelines they follow before writing policies. Consumers say they now face more restrictions, pay more and often get less in return.

“I hear stories that if you don’t have a new home or a roof that’s less than 10 years old, you’re screwed right now,” North said.

The biggest business news, delivered to you every day. Join today.

Virgil Jonson, a broker at 3rd Millennium Insurance & Financial Services in New Orleans East, agreed that the prospect of finding affordable policies with similar coverage is growing.

Before Hurricane Katrina, Jonson said 3rd Millennium focused on helping business owners get relief. They went out of their way to help local residents when it seemed no other company would, he said.

Over time, the company relied on a group of low-cost home insurance companies to help homeowners get coverage. Many of them have now failed or fled the government.

One of them was Geovera Specialty Insurance Co., which exited earlier this year — one of at least 12 companies to exit in the past two years. Another company was Access Home Insurance Co., which was the third of the seven companies to go bankrupt.

“Now who is left?” The people of Louisiana, that’s it,” Jonson said. “And we have the same thing and there’s no answer.”

The company’s failures are creating problems that will haunt the government for decades. Last month, the Louisiana Insurance Guaranty Association, a fund to help failed insurers, received approval from the state’s Bond Commission to borrow $600 million in bonds.

The money will be used to pay off unpaid debts and to replenish the organization’s reserves. Member insurance companies licensed by the government are expected to pay the bonds. But they can get that money back through a refund on their first tax return – meaning the result is less money for the government’s coffers.

Donelon sees the state’s insurance crisis as an existential one. After Katrina and Hurricane Rita, when insurers left the state in droves, they sought to attract smaller insurers willing to take on the risk of underwriting the Gulf Coast.

He said this week that he wants to restart a stimulus program created after Katrina. Under the program, the state provided $29 million in grants to five companies to move into the state and write homeowner laws.

The Insure Louisiana Incentive Program was canceled in 2009 after investigators raised concerns that the money was paid before the funding agreement was signed. Then the remaining money was given to the treasury.

The Legislature renewed the program in the previous session but did not fund it.

“We were told to come back in December with (the budget request),” Donelon said. “We hope that there will be money for companies to come and write here.”