Insurance rate pain hits home - Hikes of 30 percent expected in Louisiana.
Mike Hasten
BATON ROUGE - Almost everyone who has homeowners' insurance in Louisiana can expect rate hikes of about 30 percent in the next few months, said Commissioner of Insurance Jim Donelon.
Anyone covered by Citizens Property Insurance Corp., the state's high-risk pool, can expect much higher increases, he said. Citizens Insurance already has boosted its rates, and another 5 percent to 7 percent increase is coming.
In an address to the Press Club of Baton Rouge on Monday, Donelon said almost every insurance company likely will take advantage of the state's 10 percent "flex band" rating system, which allows companies to hike rates 10 percent a year without going through the Insurance Rating Commission. All that's required is an audited statement showing a company needs the increase to stay solvent and cover losses.
"Some will not" increase rates, Donelon said, but it probably will be a few companies that don't write policies in South Louisiana. Even those will have to pass on the 15 percent increases assessed to pay off Citizens losses and another 5 percent to 7 percent costs of a $750 million bond sale to keep the state-backed insurer solvent.
"No state has ever experienced the level of catastrophic loss we've had in this state in the past six months," said Donelon, who just finished his first week in office.
He took over from Robert Wooley, who resigned to resume his law practice in Ferriday. Donelon had been Wooley's first assistant and executive counsel. Before that, he spent 19 years in the Legislature, much of it chairing the House Insurance Committee.
Donelon said the state suffered $20 billion in insured losses from Katrina and $5 billion from Rita, reflected in 900,000 claims filed.
So far, he said, no insurance companies have indicated that they are pulling out of the state, but Farm Bureau has said it is not renewing some policies and is not writing new policies in South Louisiana.
State Sen. Donald Cravins, D-Arnaudville, an independent insurance agent and member of the Senate Insurance Committee, said Citizens has instituted its first price increase since the hurricanes "but it's just the beginning."
"The picture is not pretty of what I think will be the final impact," he said, predicting that many people will see insurance hikes of 40 percent and Citizens customers at least 10 percent beyond that.
"Right now, property owners are really caught in a serious, serious position in this state, particularly those of us in the southern part of the state," Cravins said.
Homeowners insurance may rise 40 percent to 80 percent, he said.
"We're probably talking everything south of I-10," Cravins said.
Cravins said his customers are "hollering and screaming it's high. For those with Citizens, it's not a matter of choice. It's all they can get."
Citizens covers property that other companies won't touch or would charge much higher rates.
To lower rates, Cravins said he will suggest to Donelon that the Department of Insurance allow "some kind of wind deductible" on insurance policies. "That would lower premiums significantly. If there was a hurricane, you would pay a high deductible on wind damage, $10,000 or $25,000, but you would have coverage. We've got to come up with creative ways if we're going to keep building."
"The damage was so widespread, it put a strain on everyone" in the insurance business, said state Sen. Craig Romero, Insurance Committee vice chairman and the author of the bill that established Citizens from the Fair and Coastal plans.
"A lot of people are in tough situations" trying to get insurance payments to cover their losses, Romero, R-New Iberia, said. "There are 1,001 different scenarios, but we've got to make sure we keep the insurance industry in the state."
Romero is putting together a special Insurance Committee meeting in New Iberia to solicit comments from Hurricane Rita victims on insurance issues. He said that when he has all the details worked out, he will notify residents of coastal areas.
Donelon said he plans to run for the Insurance Commissioner's post when an election is held to fill the seat. Several legislators facing term limits, including Reps. Troy Hebert, D-Jeanerette, and Shirley Bowler, R-Harahan, and Sen. James David Cain, R-Dry Creek, have indicated they also intend to be candidates.
Source: http://www.theadvertiser.com/apps/pbcs.dll/article?AID=/20060221/NEWS01/602210323/1002 |