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Insurance agents are nervous about the property insurance market

Consumers said to have few choices as some insurers leave or cease writing new policies
Published: Nov. 11, 2021 at 6:44 PM CST
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Hurricane Ida
Hurricane Ida(Andres Fuentes)

NEW ORLEANS (WVUE) - As much of Louisiana needs to be rebuilt due to Hurricane Ida’s powerful winds in late August, the property insurance market in the state is shrinking.

Longtime independent insurance agent Ross Fayard of the Amstate Insurance Agency says rates had already gone up for a lot of policyholders due to last year’s back-to-back hurricanes in Southwest Louisiana.

“My concerns are very alarming,” said Fayard.

He said there are few options for people who cannot afford higher premiums.

“My heart goes out for them; some people call me and say my premium was $1,400, it’s $4,000 now. Well, we’re going to shop. There’s nobody and the problem is, even though the rate’s high, it’s the only thing out there, so if they sign a cancellation and go look somewhere else and they can’t get insurance nowhere else I can’t get them back at that rate because these companies aren’t writing anymore,” Fayard stated.

Ben Albright, Vice President of Strategic Initiatives with Independent Insurance Agents & Brokers of Louisiana. He said insurers in the state have been under pressure. “They’ve taken a bath on claims the last couple of years, last year with Laura, Delta and Zeta, loss ratio for property or homeowner’s insurers in Louisiana was about $250%, so nobody’s really making money on it and we expect to see pretty bad loss ratios this year,” said Albright.

And that is causing some insurers to pull out of the state.

“It’s tough for a lot of reasons. We do have some that are pulling out of the state and a couple others that are in some financial trouble. We heard about two just yesterday that the department entered into receivership, it could mean rehabilitation, which is what we’re hearing, or it might be liquidation down the line,” said Albright.

Add to that the impact of reinsurance.

“Most coastal homeowners’ insurers are heavily reinsured, they have insurance on top of their insurance and the reinsurance market is really bad right now because catastrophes are happening all over the world,” said Albright.

Fayard agrees.

“The looting and the rioting and all that stuff that human does guess who pays for that? The reinsurance, they’re going to pay for that, so when their insurance pays for that it trickles down, it’s everywhere,” he said.

Even before Ida caused catastrophic damage some insurers were feeling financial stress.

‘We had Gulf Stream went insolvent at the end of last year and they’re completely out of the market now and those policies have all now been transitioned, GeoVera Insurance recently pulled out, FedNat has said they will start not renewing in January and they also own Maison Insurance here in Louisiana, and then the two that went into receivership were State National and Access Home, we’re that there are a couple other ones that the department are watching,” said Albright.

Fayard says he deals with dozens of insurance companies in search of policies for clients and few are writing new policies.

“You don’t have many choices and this is what I try and, people don’t understand that, I mean, the insurance companies, they’re not in the business to lose money, you know, they want to be productive, they want to give you a good rate but also they’re not in the business to lose money, I mean we can’t control what Mother Nature does,” said Fayard.

And higher premiums are already forecast next year.

“The honest truth is that insurance all over the state is going to be going up,” Albright stated.

FOX 8 asked the American Property Casualty Insurance Association about some of the big factors that influence whether a state is attractive to insurers.

Nicole Ganley, senior director of Public Affairs for APCIA replied by email that, “Insurers need to be able to assess and manage their risk. Natural catastrophes happen that is what insurance is for. Insurers need tools to be able to understand their risk so they can balance their book of business, pay claims and manage solvency. Heathy competitive markets give consumers the best choice in products that fit their needs.”

She was also asked if the effects of climate change could cause the insurance market to shrink nationwide.

“Insurers are working to adapt to climate change. Catastrophes are becoming more frequent and more intense. Insurers are using new technologies to assess and cover risk. We can keep a competitive insurance market which gives consumers more choices as long as insurers can predict the risk they take on and can manage their risk,” she said.

Albright was asked if relief is expected for policyholders.

“Well, it depends. Insurance tends to be very cyclical where insurers start making money and the prices go down and they go down and then all of a sudden there’s some claims events and the prices have gone down, and they’re getting less premium and having more losses and then they leave and that’s when the prices go up,” said Albright.

He thinks eventually costs will come down.

In the meantime, Louisiana has an insurer of last resort.

“We think that if a certain number go under, we may end up putting a lot in Louisiana Citizens which is the market of last resort and that doesn’t lead to a competitive environment, so we would be in real trouble,” said Albright.

Fayard hopes companies and agents he knows can hang on. “It’s scary, it really is, I’ve got buddies in the business, and they said, man, I hope I’m with my company next year.” FOX 8 asked the American Property Casualty Insurance Association about some of the big factors that influence whether a state is attractive to insurers.

Nicole Ganley, senior director of Public Affairs for APCIA replied by email that, “Insurers need to be able to assess and manage their risk. Natural catastrophes happen that is what insurance is for. Insurers need tools to be able to understand their risk so they can balance their book of business, pay claims and manage solvency. Heathy competitive markets give consumers the best choice in products that fit their needs.”

She was also asked if the effects of climate change could cause the insurance market to shrink nationwide.

“Insurers are working to adapt to climate change. Catastrophes are becoming more frequent and more intense. Insurers are using new technologies to assess and cover risk. We can keep a competitive insurance market which gives consumers more choices as long as insurers can predict the risk they take on and can manage their risk,” she said.

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