‘They can’t afford the premiums’: Insurance woes hobble Louisianans as lawmakers fret

They fought a long and losing battle to recover the costs of repairing their home, in Crown Point, after their insurance company, Lighthouse Excalibur, went belly-up. Their settlement with the state-backed guaranty association barely made a dent in the costs they incurred to make their home livable again.

Now, a different insurance nightmare has befallen D'Aquin, a 46-year old stay-at-home mom whose husband sells air conditioning systems. Before the storms, insurance cost them $1,800 a year. After Ida, she had to pay $10,000 to Citizens, the state insurer of last resort, to insure her house while it was under construction. A new policy with a private insurer isn't much cheaper, at $8,000. Coming on top of federal Small Business Administration loans and a mortgage, her family's finances are being stretched thin.

D'Aquin is one of thousands of Louisianans who are being squeezed by the state's insurance crisis, which shows little sign of abating as the Legislature debates a host of proposals aimed at righting the ship. Immediate aid – such as a break on the 10% surcharge added to all Citizens bills that lawmakers rejected last week – may not be in the cards.

That's a concern for D'Aquin, who said that In Crown Point, south of New Orleans, "for sale" signs are ubiquitous as neighbors struggle to afford insurance premiums that often reach $15,000 a year.

"I don't know how long we're going to be able to maintain it," she said. "You can't sell. No one is going to buy, because they can't afford the insurance premiums."

Other homeowners, real-estate agents and lenders also relay horror stories, with skyrocketing premiums pushing people out of the home-buying market, driving people back into the workforce and forcing some to get second jobs.

While insurance was a top issue for voters and candidates in the fall and the Legislature is racing to pass insurance-related bills, divides have emerged over newly minted Insurance Commissioner Tim Temple's plan to fix the state's beleaguered market.

Temple has mostly pushed measures aimed at making it easier on insurers, with the hope that the reinsurers that backstop the market will lower their rates in turn, leading new companies to enter the market. If that happens, Temple says, competition will eventually drive down premiums.

Temple is asking lawmakers to phase out the state's three-year rule, which has long barred insurers from dropping customers who have had policies for three years. And he wants to give companies more time to resolve claims before people can file lawsuits. He is also pushing for a bill to let companies file rate hikes without prior approval from the department, and he has changed internal rules to lift profit caps.

All of those changes will benefit the industry. Whether they benefit consumers as well remains to be seen.

"If it doesn't work, blame me," Temple said at a recent legislative hearing.

Looking to Legislature

D'Aquin has already lost faith in the system. She said she hopes the Legislature passes laws that prevent insurers from raking in premium dollars, only to go insolvent when storms hit.

So far, that seems unlikely, although a House committee did approve a bill this week that would allow more state scrutiny of companies that send most of their collected premiums to lightly regulated affiliates.

Kathy Balbero, a recently retired electrical engineer who lives in Bayou St. John, said her insurer, CURE, dropped her after only a month last year after finding out her roof was old. Her premium has gone from $3,500 a year to $8,000 a year with Citizens. She raised rents slightly on a rental property after her premium tripled.

She said she opted to stay with Citizens instead of getting insurance with a small private insurer, believing there's a better chance she'll get paid after a hurricane. Her previous insurer, Lighthouse, failed after Ida.

Josh Stearman, a 31-year-old high school band teacher in Slidell, has seen his premium – about $2,400 a year before the hurricanes – double.

Stearman's policy is up for renewal next month.

"Hopefully my increase isn't that bad," he said.

Relief idea nixed

The Republican-dominated Legislature has largely agreed with Temple's approach. Last week, the House Insurance Committee shot down a bid to bring consumers a bit of immediate relief by suspending the 10% surcharge on premiums for Citizens policyholders. Citizens is the state-backed insurer of last resort, and has seen its rolls swell since 12 insurers failed after the 2020 and 2021 hurricane season. The upcharges are meant to make Citizens unattractive to consumers, though it's often the only choice they have.

Rep. Matthew Willard, a New Orleans Democrat whose bill would have suspended the higher Citizens premiums, said Temple's plan may not bring rate relief for years.

"From everyone I've talked to, it's not going to happen overnight," Willard said during the hearing. "It's not going to happen in a year, it might not happen in two years. My concern is what happens until that point?"

But Temple, and insurers that favor his approach, argue that the move would encourage more people to stay on Citizens. Some also fretted that it would make it harder for Citizens to buy affordable reinsurance. A Citizens executive said one of the organization's "selling points" when buying reinsurance is that it charges higher-than-market rates.

"We do not want to encourage people to stay in Citizens," said Barrow Peacock, Temple's top deputy, during the hearing.

'Worse before it gets better'

The Legislature is racing to approve the pro-industry bills ahead of key deadlines in the insurance industry. Most insurers buy their reinsurance in the summer from global companies, many based in Bermuda or London.

Brian Keefer, CEO of Allied Trust, one of the few insurers active in south Louisiana in recent years, said his company has seen staggering increases in reinsurance costs in recent years. It can take up to two years for customers to see those price hikes reflected on their bills, he said.

The reverse is also true. So while Allied Trust saw "softening" in its new reinsurance agreement this month, customers may not see rate relief for some time.

"This is the best renewal we've had in four years, at least," Keefer said. "There's been more capital coming into the reinsurers. The rates are plateauing, if not possibly softening a little bit."

Keefer, like Temple, argues that eliminating the three year rule and making other industry-friendly reforms will convince reinsurers to look more favorably upon the market.

Roof age has become a key metric for the few insurers writing in south Louisiana, with those older than five years often considered too risky. Keefer said his firm will write policies for homes with roofs up to 10 years old. The state has a program that doles out $10,000 each, via lottery, to people who put on stronger roofs, and the Legislature is in the process of deciding how much money to give that program. Some insurers offer significant premium discounts if the policyholder has a fortified roof.

Keefer believes Temple's package is needed, but he doubts consumers will get much relief in the short term.

"It's going to get a little worse before it gets better," he said.