Louisiana Commissioner: 7 Percent Hike Appropriate for Citizens

January 8, 2009

Insurance Commissioner Jim Donelon says plans by the state’s so-called “property insurer of last resort” to raise rates by an average of 7 percent in April are appropriate.

The much-amended rate increase plan will raise an extra $15.3 million for the Louisiana Citizens Property Insurance Corporation.

The increase amounted to a statewide average of 26 percent when it was first proposed back in June, but it’s been scaled back considerably. One reason for the changes is that Citizens had been unable to produce a reliable financial statement since Hurricane Katrina because of problems with its computers.

In December, Donelon rejected Citizens’ actuarial analysis as “flawed,” so the final rate change sets Citizens’ prices based on an analysis of prices by private companies. The insurance department decided to go with that market analysis as the basis for the rate change.

By law, the state-created insurance corporation is supposed to charge at least 10 percent more than the price private companies charge in all but 11 hurricane-affected parishes.

“I think it’s appropriate for very legitimate public policy reasons,” Donelon said of the rate change. “In order to keep it as a market of last resort, we must keep prices above the private sector.”

Members of Citizens’ board are expected to review the latest adjustments to the rate increase at their monthly meeting Jan. 8.

The 7 percent figure is an average. Different areas will see different rates.

Jefferson Parish, for instance will see rate increases of 49 percent in “coastal” areas, which essentially means below the Intracoastal Waterway, and 35 percent in the rest of the parish. Citizens customers in St. John the Baptist will see a 41 percent increase in their premiums; policyholders in St. Charles, a 37 percent increase.

Some parishes, such as Orleans, will see rates decline in most areas.

Citizens is the state’s third-largest insurer of homes, with about 125,000 policies. Policyholders will see the rate changes as their policies renew starting April 1.

John Wortman, chief executive of Citizens, said some homeowners could see two rate changes this year. The rate increase that will take effect April 1 is actually the 2008 rate adjustment; Wortman says he doesn’t want to risk that the 2009 rate analysis required by law will be delayed, so the company plans to start working on it some time between April and June. Homeowners whose policies renew in the fall could see both the 2008 and 2009 rate changes occurring at the same time.

Topics Louisiana

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