As insurance costs rise, some Louisianans drop insurance, raising alarms

By Sam Karlin

The Advocate, Baton Rouge, La.

As Louisiana's insurance crisis pummels homeowners, more and more people are dropping coverage, raising the disquieting possibility that a direct hit from a hurricane could inflict damage that would leave thousands of people unable to recover.

A review of insurance policies, as well as interviews with agents, analysts and homeowners, shows many Louisianans who have long bought insurance are dropping it entirely. Others can only find policies with skyrocketing deductibles or coverage limits that effectively mean they would have to pay out of pocket to replace a roof if a hurricane strikes, even as they pay high premiums each month.

Many Louisianans are taking on those additional risks as the state enters what is predicted to be the busiest Atlantic hurricane season on record.

The trend is worrying close observers of the market. Federal disaster recovery programs generally don't come close to making uninsured homeowners whole. If a large share of people can't afford to rebuild after a widespread disaster, it could pose broader risks for that community's ability to recover.

The decision by some people to buy cheaper high-deductible insurance, or forgo insurance altogether, represents another layer of a crisis that has become a frontline issue for south Louisiana residents. It also reflects the growing uncertainties faced by places like New Orleans that are most at risk from climate change.

Recent data is scarce, and the Louisiana Department of Insurance says it doesn't track the rate of insured homeowners. But Ben Albright, head of the Independent Insurance Agents and Brokers of Louisiana, said agents are reporting that a "significant number" of people who have historically bought insurance are opting out as premiums rise. He said the trend is worrying, as many of those forgoing insurance won't be able to cover rebuilding costs on their own.

"That's what I'm more scared of," Albright said. "It puts you in a place where they just write it off and leave Louisiana. I think that's a recipe for disaster for our state."

'I'm worried'

Even before the insurance crisis began, Louisiana was among the states with the highest rate of uninsured homeowners in the nation, according to the most recent data. One study by the Consumer Federation of America put the share of uninsured homeowners here at 12%, compared to an average of 7% for the rest of the country. That was in 2022, before the biggest rate hikes began.

The insurance crisis is cascading through Louisiana's housing market and is touching virtually all types of homeowners. Habitat for Humanity is being forced to foreclose on recipients of low-cost homes because insurance premiums caused monthly notes to double. Retirees are being pushed back into the workforce. White-collar professionals are contemplating leaving as costs soar. Home sellers are watching their homes languish on the market, and prospective buyers are being pushed out of the market by prohibitive costs.

Mary Kay Hartman, born and raised in New Orleans, has been in her Mid-City home for 33 years, after she and her sister bought the house together. She grew up on Grand Route Saint John and graduated from Cabrini before becoming a nurse practitioner.

Now 68, Hartman is retired and on a fixed income. She has gone without homeowner's insurance for several years because of high costs; her sister's death has made it harder to afford the bills.

But when she read in the news that this year's hurricane season would be the worst on record, she decided she needed a policy.

The quotes were hard to stomach. For the cheapest policy, she'd have to pay $1,000 a month. Even at that price, her deductible in the case of a hurricane would be over $20,000. She chose not to buy insurance.

"I'm worried," she said. "Praying a whole lot. And what I'll do if I have damage, I just don't know at this point. I really don't."

Hartman is contemplating selling her home soon. But she wants to stay in New Orleans.

"It's in my blood," she said.

'So many challenges'

Most mortgage lenders require homeowners to buy insurance, but people who have paid their house off, often retirees, can decide whether to buy coverage. Those who opt out are obviously at great risk.

But even people who pay thousands of dollars a year for insurance protection are facing harsh realities.

Many insurers have pulled back from offering policies in risk-prone places like Louisiana and Florida. The few that remain active in south Louisiana are mostly smaller regional carriers, and they are increasingly watering down coverage plans to mitigate their risk. Inflation has driven up the cost of construction; it has also led many insurers to raise the replacement costs of homes they insure, and thus premiums.

Several homeowners told the Times-Picayune their deductibles — what a policyholder has to pay out of pocket in the event of a loss — have risen from a manageable, fixed amount to as much as 5% of the home's value. That effectively means that many homeowners will have to pay for a new roof themselves if a hurricane rips it off.

And that's not all. Many insurers are refusing to write policies at all for roofs that are older than 5 or 10 years. And many are adding riders that say they'll only pay for a percentage of the roof, depending on how old it is.

Rachel Langkopp, agent at Esplanade Insurance Agency, said most of the policies she sees have a roof replacement schedule or otherwise truncated coverages, especially for older roofs. Deductibles have risen dramatically.

"Some people just say, 'I don't care, I just need my premium to be down.' That's fine until something happens," Langkopp said. "It's definitely something I'm up thinking about when bad weather blows through."

Dropping insurance in response to price hikes means many will be unable to pay for repairs. A recent paper by researchers with Freddie Mac and the Environmental Defense Fund found that people without insurance were more than five times as likely as insured people to have unmet funding needs a year after a hurricane hits. The economic benefits enjoyed by people with insurance also rippled through the local economy, the paper found.

Ben Collier, assistant professor at Temple University who studies how households and companies respond to climate risk, said federal aid, like grant and loan programs, are not designed to make people whole, whereas insurance has been. And there's growing evidence those programs tend to go to wealthier people who can afford to repay loans and sort through piles of paperwork.

"There's so many challenges that can emerge from this that can delay recovery from a disaster," Collier said.

'Roll of the dice'

The latest data on uninsured homeowners doesn't capture the most recent turmoil in Louisiana's insurance market, but analysts and agents believe more are ditching insurance entirely when possible.

David Blades, associate director of industry research and analytics for AM Best, the top insurance ratings agency, said anecdotally, he sees policyholders taking less coverage in exchange for lower premiums. And in places at highest risk from climate change, including Louisiana, Florida and California, the share of people with insurance seems to be trending downward.

Louisiana Insurance Commissioner Tim Temple has sought to steady the market through a series of bills that make it easier for insurers to raise rates and drop policyholders, in hopes that more companies will enter the market. And he supported a bill to temporarily suspend the 10% surcharge paid by customers of Louisiana Citizens, the state-backed insurer of last resort, for three years.

A spokesperson for Temple said the agency doesn't track data like the number of policies that could shed light on underinsurance, and didn't respond to further queries.

For Bill Rachal, who works remotely doing IT work for a university, insurance may not cover anything if he has to replace the roof on his home in the Lake Oaks neighborhood.

When he bought the house a decade ago, his premium was $5,000 and his storm deductible was 3%. Last year, he joined thousands of Louisianans who were forced onto the rolls of Citizens, where his premium was an astounding $18,000 a year.

He finally found a policy with a private carrier for $11,000. But there was a catch: The insurer wouldn't cover his roof at all. He estimates replacing it would cost about $25,000.

He realizes it's a "roll of the dice" in hurricane season, but Rachal said it was impossible to pay $1,500 a month for insurance alone.

"It was unsustainable," he said. "It would either be sell the house or find a better policy. Fortunately, I didn't have to move because of it."

Rachal said he and his wife will likely move out of New Orleans once their youngest son, a junior, graduates high school. He said a combination of insurance costs, "toxic politics" and general quality of life is pushing them out.

"I love New Orleans," he said. "But it's really getting to the point it's not worth it anymore."

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