Louisiana Citizens, the state’s property insurer of last resort, is seeking a 63% increase in residential insurance premium rates beginning Jan. 1, 2023, to deal with the fallout from the past two hurricane seasons.
The nonprofit company, which has seen its policy count balloon to 115,000 this year, announced its intentions at a recent board meeting. The state’s insurance commissioner, Jim Donelon, said it would take his office three to four weeks to review the request and make a decision on whether to approve it.
“This one is unique and significant, so I wanted to be extra careful in our deliberations and our decision,” Donelon told the Louisiana Record.
The Louisiana Department of Insurance (LDI) approved a 73% rate increase request from Citizens on commercial properties earlier this year.
Louisiana Citizens’ residential rate hike request comes in the wake of the failure of seven insurers that provided coverage to some Louisiana property owners – Gulfstream, Access Home, State National Fire, Americas, Lighthouse, Southern Fidelity and Weston.
Despite the challenges facing the Louisiana property insurance market, Donelon said he is hopeful the market will recover in the wake of hurricanes Laura, Delta, Zeta and Ida.
“Louisiana is in a strong position to both make the policyholders of the failed insurers whole and quickly improve our market to again offer affordable insurance to our constituents,” he said in a Sept. 8 letter to members of the Louisiana Legislature.
Though the Citizens homeowners rate hike proposal is significant, the company’s customers represent only 5% of the property insurance market in the state, according to Donelon. A future Citizens rate increase will not have any kind of spiraling impact on private insurers, he said.
“It would have a positive effect on the private sector by right-pricing it to be just above the price of private insurance,” Donelon said.
The commissioner has urged state lawmakers to use surplus funds generated by LDI, which are anticipated to reach at least $15 million, for an incentive fund to encourage other companies to take part in the Louisiana insurance market.
Litigated insurance claims filed as a result of actions by some contractors, public adjusters and attorneys continue to be a big issue in Louisiana, Donelon said, adding that he’s seen an avalanche of advertising encouraging people to sue over claims.
“It is the model that has driven the Florida market to dysfunction,” he said.