Insurance companies have until May to decide whether to hike their homeowners rates 15 percent in Louisiana, to make up for losses caused by Hurricanes Katrina and Rita.
The firms must pay 15 percent of their 2004 earnings to the Louisiana Citizens Property Insurance Corp., to help the state-created “insurer of last resort” recoup its losses. The companies may pass on that 15 percent cost, known as a “regular assessment,” to their customers.
Two firms that will are ANPAC Louisiana, the state’s 10th largest insurer, and Shelter General Insurance Co., the 12th largest, said Rich Piazza, actuary with the state Department of Insurance. Most companies will likely impose the 15 percent hike to recoup that money, though Louisiana’s largest insurers, State Farm and Allstate, have not informed the state of their intentions, Piazza said.
Some companies will likely choose not to, partly out of fears their customers will defect to other insurers. Firms must notify the insurance department by May if they intend to pass on the cost to their clients, Piazza said.
The 15 percent hike is one of several possible increases that homeowners face in the wake of Katrina and Rita. Another is a possible “emergency assessment,” also related to Citizens, though it has not been determined whether Citizens will require it.
Additionally, insurance companies have had the right since 2003 to increase their rates by up to 10 percent without approval from the state.
“I have no doubt there will be rate increases as a result of these storms,” Jim Donelon, the state insurance commissioner, said in a speech Feb. 20 at the Press Club of Baton Rouge.
In the most extreme cases, homeowners could face rate hikes of more than 30 percent this year; others will have lesser increases or no change, said Amy Whittington, an insurance department spokeswoman.
Piazza said it took insurers up to three years to determine whether to impose “sizable increases” as a result of property losses caused by Hurricane Andrew, in 1992, considered by the National Climatic Data Center to be the country’s fourth most costly natural disaster.
Donelon took over as head of the Department of Insurance on Feb. 16, after Robert Wooley, the former commissioner, stepped down. Donelon had been Wooley’s chief deputy.
Voters will cast ballots in a Sept. 30 election to choose Wooley’s replacement as the state’s chief regulator of companies that write insurance policies in the state. The job pays $85,000 per year.
The candidates include Donelon, R-Metairie, a former member of the state House; and state Sen. James David Cain, R-Dry Creek, chairman of the Senate’s insurance committee.
The winner of that race will serve out the rest of Wooley’s term, then face re-election for a four-year term in 2007.
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