Homeowners insured by the Louisiana Citizens Property Insurance Corp. may see rates going up by 10.5 percent overall this year, although residential customers without wind and hail coverage will probably see a smaller bump, company officials said Thursday. The board of the state-run insurer of last resort voted 6-2 to file a rate change seeking a statewide average rate increase of 10.5 percent with Insurance Commissioner Jim Donelon's office. Donelon's staff must review the accuracy of the request and approve or reject it.
If it is rejected, the board must rework the request; if Donelon approves it, the board must ratify the new rates.
Citizens Chief Financial Officer Steve Cottrell said although the 10.5 percent increase is being sought, homeowners who do not have wind and hail coverage from Citizens can expect an average increase of just 2.4 percent - about $35 for the average policy premium of $1,600 a year.
The bulk of the policies sold through Citizens are standard homeowners insurance policies that do not cover hail or wind damage. But Citizens also sells a smaller number of narrower policies that specifically cover wind and hail damage. Those wind and hail policies are usually sold to homeowners who already have a standard homeowners policy with Citizens or one of the other insurance companies operating in the state.
Cottrell said because Citizens has underpriced its wind and hail coverage for years, those policies will see an average rate increase of 58 percent. But when that 58 percent increase is lumped in with the smaller increase on the standard policies, he said, it works out to be an average increase of 10.5 percent statewide.
Cottrell said there are about 122,000 Citizens policies now in effect -- 6,000 commercial policies and about 116,000 for personal property insurance. Roughly 35,000 of the personal property policies are for wind and hail only and about 81,000 are the standard Citizens policies.
Cottrell said customers with standard policies will see an average 2.4 percent increase in their premiums starting June 1.
By law, Citizens much charge a premium that is at least 10 percent higher than the most expensive private insurance coverage in an area. Cottrell said that the wind-and-hail coverage from Citizens has been "underpriced. We are trying to avoid driving more people to Louisiana Citizens because it is cheaper (for wind and hail coverage)."
Cottrell said that the number of Citizens policies for wind-and-hail only coverage is up 17.5 percent in the last year. With the proposed 58 percent rate increase, Cottrell said, many policyholders will probably go to other companies for the coverage.
"The majority of our customers will see a 2 percent raise (in rates) unless they have wind and hail," Cottrell said. "It is possible to purchase a homeowner policy excluding wind and hail (coverage) from the private market and purchase a wind-and-hail policy from (Citizens) for less than purchasing a full coverage homeowners policy from the private market."
Under the proposed 10.5 percent statewide rate increase, policyholders in Orleans Parish above the Gulf Intracoastal Waterway would see a 6.7 percent increase in rates and those below it would see a rate decrease of 16.5 percent. With the wind and hail coverage excluded, policyholders would see an increase of 3.7 percent above the waterway and a decrease of 16.2 percent below it.
Under the 10.5 percent rate increase, Jefferson Parish policyholders above the intracoastal would get an average rate increase of 9.9 percent and those below it an average rate increase of 39.6 percent. With the wind-and-hail coverage factored out, the increases would amount to a jump of about 0.2 percent above the intracoastal and a hike of 35.9 percent below it.
In St. Bernard Parish, the proposed 10.5 percent rate increase would mean an average 7.4 percent increase above the waterway and a 9.6 percent decrease below it. With the exclusion of the wind and hail coverage, rates would go up 4.1 percent above the intracoastal and fall 9 percent below it.
In Plaquemines Parish the 10.5 percent statewide average increase would mean a 12.2 percent hike north of the waterway and 10 percent increase below it, while the wind-and-hail exclusion rates would mean a decrease of 2.4 percent for residents above the waterway and a 4.9 percent increase for those below it.
For Citizens policyholders in it St. Charles Parish, the average 10.5 percent statewide rate increase would mean an increase of 1.8 percent but without the wind-and hail coverage it would mean a 0.1 percent decrease. In St. John the Baptist Parish, policyholders ould expect a flat 13.4 percent average increase in either scenario, while in St. Tammany Parish, the statewide proposal of 10.5 percent would mean an average premium hike of 7.4 percent, while the exclusion of wind and hail would mean an average rate increase of 4.1 percent.