August 23nd, 2013
New York, New York
HOW BAD CAN LOUISIANA INSURANCE CLIMATE GET?
In the movie Guys and Dolls, gambler Nathan Detroit (played by Frank Sinatra) says: “How can it get any worse. What more can you do to me?” That’s what thousands of Louisiana property owners are saying about the state’s insurance climate for insuring their homes and businesses. The cost of property insurance is skyrocketing and rates have become unaffordable. And if a property owner is able to scrape up the spiraling yearly premiums, their claims are often not being paid. People are moving out of Louisiana and fewer potential home and business owners are moving in. Outrageous insurance costs are one of the major reasons that growth is at a standstill.
I wrote about how projections of increasing premiums could, in some parts of the state, exceed 1000% in this column last week. The national flood insurance program was re-authorized last year by congress and was given the authority to reduce subsidies to coastal states like Louisiana. Apparently, coastal state members of congress failed to read the legislation, voted for it, and are now hollering for delays.
But that’s just one part of the problem. Louisiana has the dubious distinction, year after year, of having the highest property insurance rates in the country. Homeowners in the state pay an average of more than $1600.00 to insure a home, with much steeper rates throughout south Louisiana. And the bugaboo that has caused so much damage to the state’s insurance climate is Citizens Property Insurance Company. A Baton Rouge Business Report front-page headline called Citizens the “worst financial disaster in the last 100 years.” Louisiana State Treasurer John Kennedy has echoed that view repeatedly and has called on the legislature to abolish it.
The contrarian view was recently offered by Insurance Department officials who, in a letter to the legislature, called the company “a model on the national stage.” And they are right if you are searching for an example of dysfunction and incompetence. Respected columnist James Gill, who has written for the state’s largest two newspapers, concluded, “the entire citizens insurance set up is straight out of Alice in Wonderland,” and warned property owners to “brace ourselves for disaster.” Gill also pointed out that Citizens will pay out well over $100 million for delays in paying claims, and concluded that the Citizens board “seems determined to make plaintiff lawyers as rich as possible.” Understandably, the Insurance Department did not share Gill’s opinion with Louisiana lawmakers. Continue Reading…….