Louisiana Citizens Insurance OKs 7% on Average Rate Hike

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Homeowners who are dependent on Louisiana’s property insurer of last resort will see rates increasing by an average7 percent statewide.

However, rate increases – as well as decreases – will vary widely, especially in southeastern Louisiana where Louisiana Citizens Property Insurance Corp. has the heaviest concentration of its 129,000 homeowner policies.

Citizens originally proposed a 10 percent increase last year. But after further review by the state Department of Insurance, the hike was cut to 7 percent, which will bring Citizens about $14 million more annually.

The new rates, approved on a 7-2 vote by Citizen’s board, are effective July 1.

Under state law, Citizens is required once a year to review its rates, compare them to the private insurance marketplace, find the highest private rates and add 10 percent to that to set its rate structure. Citizens is not allowed to compete with private insurers. As a result, what occurs in the rate-setting process with private companies directly impacts what Citizens’ customers will pay.

“We don’t have the latitude of being nice under the law,” said Insurance Commissioner Jim Donelon.

The board was told that the original rate hike proposal was reduced, partially, after the Insurance Department discovered that some private insurers had provided Citizens with inaccurate data, such as the number of their policyholders.

The question of how much more or less Citizens policyholders will pay varies from parish to parish. For example, Orleans Parish homeowners are looking at a 12.4 percent increase, while neighboring Jefferson Parish customers get a 10.2 percent decrease. St. Tammany Parish homeowners with Citizens are looking at a 14.2 percent increase.

In other regions of southeastern Louisiana, Lafourche Parish is set for 10 percent hike, while Terrebonne Parish gets a 4.8 percent increase. Homeowners in Plaquemines Parish face a 38.8 percent increase, while their counterparts in St. Bernard Parish are in line for a 4.8 percent decrease.

Donelon said that the concentration of Citizens’ policies is so focused on southeastern Louisiana that Hurricane Gustav in 2008 was the company’s second-largest loss event, rather than 2005’s Hurricane Rita, which was the second-largest for private insurers.

Last month, the company boosted rates for its 5,000 commercial property policies by an average commercial 4.7 percent.

Citizens CEO John Wortman said the company would begin its next rate review around July 1.

In the meantime, the state’s largest private home insurer, State Farm Fire and Casualty Co., the state’s largest residential insurer, is asking for an average 9.9 percent rate increase for its 301,000 policyholders.

Citizens also is continuing to transfer policies to private insurance companies. The current count of 129,000 is down from 131,000 at the end of 2009. Citizens had 167,000 policies in 2007 and cut the number to 149,000 by the end of 2008. Wortman has said he hopes the company will be down to 120,000 policyholders by the end of 2010.