Years into home insurance crisis, when will Louisiana residents get relief?

While Louisiana lawmakers debated auto insurance this spring during their legislative session, sky-high home insurance premiums continued to crush residents along the state's coast.

Homeowners insurance rates keep rising, forcing some residents out of their homes, while the state waits for the free market to look more favorably on Louisiana.

So far, the approach has not led to lower rates for most homeowners in the state. Many saw their insurance premiums climb to unaffordable levels after a series of hurricanes in 2020 and 2021 upended the market.

Home insurance rates rose by 16% in 2022 and by 14% in 2023, on average, according to data from the Louisiana Department of Insurance. A dozen insurers went belly up.

Last year, homeowners insurance rates rose by 6.6%, on average.

And so far this year, rates are up 1.2%. If the trend holds through the end of the year, it would be the smallest jump since 2018, according to state data.

Not everyone is seeing relief. In May, an insurance group for teachers raised rates by an average of 14%, according to rate filing data. A month earlier, two insurers from another group raised rates by 12.5%. A handful of insurers cut rates by varying levels, from 2% to 11%.

State lawmakers made a few attempts to scale back those increases by passing legislation this spring that strengthens incentives and grants for homeowners who put fortified roofs on their homes. The changes to the law come as Louisiana has reentered hurricane season, and storms have grown more extreme from climate change.

Insurance Commissioner Tim Temple touted several bills he supported that became law, including on fortified roofs, giving customers more notice when their policy is canceled and requiring parishes to permit and inspect new roofs. Temple also supported several bills that didn't pass, including proposals to set up deductible savings accounts and requiring coastal areas to mandate fortified roofs.

Temple said it's too soon to know whether the new laws will affect rates, but said many of the proposals will "bring competition, reduce risk, increase insurability and support consumers."

"I am encouraged by the early positive trends we are seeing, like insurers filing fewer, less costly rate increases, and even beginning to file more rate decreases than in recent years," Temple said in a statement.

Political fight

The Republican-controlled Legislature sidelined bills that would have taken a more direct approach to the crisis, including proposals to give homeowners tax breaks to offset weighty premiums and requiring insurers to deliver certain discounts to residents who put stronger roofs on their homes.

Instead, they largely continued to embrace Temple's favored free-market approach. He has embraced policies that loosen rules on insurers, making it easier for them to drop policyholders and charge customers as they see fit.

The Legislature did pass bills that set up a dedicated source of funding for the state's fortified roof grant program, though only a fraction of homeowners who apply will be able to benefit from it. The program gives homeowners $10,000 to put stronger roofs on their homes, and many have reported significant savings on insurance after installing them.

And Gov. Jeff Landry recently signed a bill by State Sen. Kirk Talbot, R-River Ridge, to give people a $10,000 tax credit if they put fortified roofs on outside the grant program. The credit must be used against tax liability — it's not a check — and it is capped at about 1,000 people per year on a first-come, first-served basis. That means people who file their taxes earlier will be first in line.

Talbot said he's telling constituents to shop their insurance quote to try to find a better rate, and to put a stronger roof on if they can afford it.

"We're trying to deal with things we can control," Talbot said. "We obviously can't control storms and all that, but we can control these other things."

Landry was front and center on the car insurance debate that took up most of the oxygen in the Capitol this spring, and sparred publicly with Temple over high auto insurance rates. But he has not championed a package of bills so far focused on the rising cost of homeowners insurance.

One bill he supported, HB148 by Rep. Jeff Wiley, R-Maurepas, gives Temple more power to reject rates for home and car insurance that he deems "excessive." But Temple has all but vowed not to use the authority, saying it would upend the market by arbitrarily setting rates. It's unlikely to have any immediate impact on lowering rates.

In a statement Friday, Temple railed against the bill as a "red flag," saying it destabilizes the market by "giving one politician the power to reject rate changes without clear rules or reasons." He said he's meeting with a "major national insurer" next week to talk about how it will impact the company's operations in Louisiana.

Landry's spokesperson, Kate Kelly, touted the governor's signing of bills to strengthen the fortified roof program and said the state can reduce homeowner's insurance costs through "other structural improvement programs that have already proven effective in coastal states." She didn't respond to further queries about those programs.

"The governor continues to engage directly with insurance companies to discuss other avenues that can bring relief to Louisianans," Kelly said in a statement.

State Rep. Matthew Willard, D-New Orleans, was less optimistic. He said the Legislature did nothing to reduce home insurance costs this session, saying members were sidetracked by the yearslong fight between trial attorneys and insurers over "tort reform," or changing the legal system to help insurers avoid big payouts when sued.

"The best you should expect is for the rate to stabilize and not go up," Willard said. "That's just me being honest. I have no indication to tell people otherwise. I'm not going to sell them false hope. The state has done that for long enough."

Global business

In January, the reinsurance broker Guy Carpenter published an obscure but crucial statistic: The cost of reinsurance was expected to drop by 6.6% this year.

Insurers take premium dollars from homeowners and promise to pay if they have a covered loss. But they don't keep all that risk. Instead, they spend billions of dollars buying their own form of protection — reinsurance — from a more loosely regulated network of companies around the world, many based in Bermuda.

After 2017 wildfires in California caused billions in damages, reinsurance costs soared for seven straight years. Those effects reached insurance companies in Louisiana, who faced huge cost hikes and passed them along to homeowners in the form of higher premiums. Many rely heavily on reinsurance because they are smaller, and have less money than giants like State Farm.

Rising reinsurance is a big reason Louisianans have seen rates rise. And the projected drop this year could be good news.

The drop is likely the result of investors flooding the reinsurance market to take advantage of massive profits tied to the years of cost increases by reinsurers. A recent report by Howden Re, a reinsurance adviser, said insurers were finally able to take advantage of competition in the market this year.

"Rate levels remain historically high but are now outpacing loss trends in many areas," wrote Kyle Menendez, managing director of Howden Re, North America, in a recent report.

The dynamic with reinsurance also underscores a hard truth for Louisiana: Even if state lawmakers make a host of changes, the global insurance industry could be upended by a storm in Miami or wildfire in California, like happened earlier this year.

Late in Louisiana's legislative session, more than 30 lawmakers of both parties signed onto a resolution by Willard, the New Orleans Democrat, urging Congress to step in and provide solutions. Some insurance advocates and members of Congress have pushed for a federal intervention into the reinsurance market, which they say could stabilize costs for homeowners amid increasingly devastating natural disasters.

Willard's resolution doesn't have the force of law, but he said he hopes it will encourage federal lawmakers to "step in and provide some relief."

"We're in a precarious situation where our rates are affected by any natural disaster that happens across the globe," he said. "Given that, I think it's worth Congress at least exploring some type of national program."