Louisiana Home Insurance Rates Still Climbing

Much of life in New Orleans has returned to normal now, several years since the devastation wreaked by Hurricane Katrina. For many residents, however, the exception to that rule is the rate they must pay to obtain and maintain a homeowners insurance policy. That rate has increased steadily since Hurricane Katrina struck, but according to the insurance industry in the state, the single hurricane alone is not to blame. Louisiana, in fact, was struck by four different hurricanes recently, all of them touching down within a three-year time span.

The accumulated damages of all of these weather events has caused the insurance industry in Louisiana to re-consider their underwriting standards and move premiums upward to reflect the increased risk that property in Gulf Coast states represent. This is a risk that some climatologists believe is here to stay, since more active hurricane seasons – and more violent ones – are believed by some weather specialists to be linked to the phenomenon of climate change.

The Importance of Competition

Louisiana has not had a major hurricane event since 2008, a fact acknowledged by Jim Donelon, who serves as the Insurance Commissioner for the state. “It’s a very big positive for us that we’ve been blessed with another non-event hurricane season” he remarked, adding that each year that passes without a major hurricane or tropical storm causes Louisiana to look like a better prospect to insurance companies. Donelon has concerns that some companies may not want to write home insurance policies in the state at all if hurricanes continue to strike with regularity.

That would have a strong impact on rates because additional companies in the market create a competitive atmosphere in which they must compete for customers. While it is possible to compete on the basis of customer service, dependability and interesting new insurance features, by and large most companies must usually compete on price, since that is the single biggest issue for most consumers, particularly in times when the economy is struggling and many people are concerned about their finances both today and in the future. Without enough insurance companies in business in the state, however, price competition will be reduced.

Better rates are not the only reason for Donelon to desire a competitive insurance market. Having more companies also means that fewer residents will be unable to obtain a policy at all, a situation that usually requires them to do business with the “insurance of last resort,” which in Louisiana is Citizens Insurance. This is an expensive option that few homeowners desire, though they have no choice if their mortgage companies demand coverage and no other company will insure them.

The good news is that the number of people on Citizens Insurance has now fallen to below the level it was at prior to Hurricane Katrina. This is due in part to a dozen additional companies beginning to write policies after Katrina.

Donelon admits that rates are currently high and advises homeowners to query a variety of insurance companies and compare the different insurance rates to determine if a better deal can be found. The best way to do that is online, where comparison sites can aggregate home insurance rates so that customers can compare policies.