Small Insurer Granted 47.1 Percent Increase, Vows to Stay in La.

Homesite Insurance has promised to resume writing policies in southern Louisiana now that the Louisiana Insurance Rating Commission has granted it an average rate increase of 47.1 percent.

The increase, approved Sept. 20, is one of the heftiest approved by the state body since Hurricanes Katrina and Rita struck Louisiana a year ago. The hike will affect the Boston company’s 1,771 Louisiana customers when they begin receiving their annual renewals starting Nov. 9.

Industry observers say the increase may be painful but that the market is supposed to work that way.

“If you’re comfortable with your product, and you can get the right price for it, you’re going to see companies dip their toes in and gradually get back into the market,” said Joe Annotti, senior vice president of public affairs at the Property Casualty Insurers Association of America.

After a disaster, the market freezes as companies absorb the cost of paying claims and assess how their business was affected, Annotti said. The largest operators may try to reduce their exposure in the market, and homeowners find themselves with few options other than residual insurers, such as the Louisiana Citizens Property Insurance Corp., the state-sponsored insurer of last resort.

But because Citizens is, by law, the high-priced leader in the market, it doesn’t take much for insurers to undercut Citizens and maintain robust rates. As long as regulators provide a stable environment and are willing to approve rate increases so that insurers can price their products to match their new perceptions of risk, they will begin to come back, Annotti said.

Companies also are encouraged by the new building code Louisiana adopted last year, which will improve the resiliency of homes to storms, and by the fact that it’s almost the end of the most active period of hurricane season and the United States has not been struck by a major storm. Moreover, the fact that court rulings in Mississippi so far have not stuck insurance companies with flood damage bills is being viewed as a positive sign, Annotti said.

In July, Meritplan Insurance Co., a brand name of Balboa Insurance Group Inc., which is a division of Countrywide Financial Corp., was approved for a 45.2 percent rate increase. Although the company only had 552 customers in Louisiana, it said it wanted to position itself to resume writing business.

Homesite’s 47.1 percent rate increase is a statewide average. Homeowners in North Louisiana will see decreases in their rates as Homesite tries to spur new business to balance the company’s portfolio and enable it ultimately to take on more new risk in coastal areas. Homesite customers in the New Orleans area probably will see a 60 percent increase in their bills. Homesite policies also carry a 3 percent mandatory hurricane deductible in South Louisiana.

Topics Carriers Louisiana