BATON ROUGE, La. (BRPROUD) — Louisiana’s insurer of last resort, Citizens, is raising its rates by 63 percent.
State Insurance Commissioner Jim Donelon says this is because of insurance companies dropping out of Louisiana. This left thousands of people signing policies with Citizens. According to Donelon, Louisiana law requires Citizens’ rate to be at least 10% more than the highest market rate.
“There’s no sugarcoating it — this increase is extremely painful but required by law to make sure Citizens can handle a potential future disaster for its many policyholders,” said Commissioner Jim Donelon. “My staff and I are working with the legislature to attract more insurers to the state through the use of a program that was highly effective following hurricanes Katrina and Rita, which will give Citizens policyholders, and all Louisianans, more and cheaper insurance options in the private market.”
“It’s really caused a real strain on the real estate market,” said Norman Morris, CEO of Louisiana Realtors Association.
Morris says the insurance crisis creates a fear that buyers and sellers will not be able to afford a home and can eventually shut down the market. But—he does not expect this to last forever.
“63 percent is a rough pill to swallow,” he said. “It’s a high rate to ask people to pay, but the alternative is not very good either, in fact, it’s worse. Without an insurer of last resort, those who can’t find a policy on the private market have nowhere to go.”
Morris agrees with Donelon that the way to reduce the burden of future rate increases is through the Insure Louisiana Incentive Program. This program will give companies incentives– to take policies out of Citizens into private markets. The program is now awaiting funding from the legislature.
“If you can’t get property insurance to write on your home or your businesses, you can’t buy a home or open up a business,” said Morris. “We certainly don’t want that to be the case in Louisiana.”
The state advises Citizens’ policyholders to contact agents monthly to find new quotes on the private market. If you do find a new policy, Citizens will refund premiums.
The rate increase will not affect Citizens’ current policyholders until they renew their policy after that date.