Homeowners in southern Louisiana who cannot obtain private insurance face average rate hikes of 27 percent to get coverage, although some may pay 50 percent more, according to reports from The Advocate and the Associated Press.
A price schedule for the Louisiana Citizens Property Insurance Corp. was approved recenty by the Insurance Rating Commission.
Louisiana Citizens is a nonprofit corporation that replaced the FAIR and Coastal Plans that provided an insurer of last resort for homeowners in high-risk areas from storms.
The premium schedule reflects a state law requiring Louisiana Citizens to charge at least 10 percent more than the most expensive of a parish’s top 10 private insurers, said company secretary Terry Lisotta.
The 8,000 clients of the Coastal Plan will pay $4 million more this year than last, for an average increase of 52.4 percent. Lisotta said the hike will vary by parish with some policyholders seeing little change. The average increase will be $500.
The 121,000 property owners covered by the FAIR plan will see premiums jump by $21 million, or 26.9 percent, with the average individual increase of $174.
Louisiana Citizens was formed to bring stability to the high-risk market. Property and casualty companies doing business in Louisiana pay an annual assessment to help fund coverage. Previously, if there was a surplus, the money was returned to insurers. Insurers had to make up any deficit.
Insurance officials said the system resulted in private companies having to pay their own claims, plus the additional assessments, when hurricanes struck. As a result, some insurers left the state or stopped writing new policies, especially in hurricane-prone areas.
By holding its premiums tax-free, Louisiana Citizens hopes to build up a surplus, which reduces the odds of private insurers paying additional assessments during disasters. The program is modeled on a similar system in Florida.
Lisotta said the formation of Louisiana Citizens and other changes in insurance laws have already had an effect. In the last five months, 4,500 homeowners once insured by Louisiana Citizens have found coverage in the private market, he said.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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