Some homeowners seeing astronomical insurance premium increases

Insurance Commissioner Jim Donelon weighs in
Published: Jan. 21, 2022 at 6:53 PM CST
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Houses in the New Orleans area.
Houses in the New Orleans area.(Source: WVUE)

NEW ORLEANS (WVUE) - Some local homeowners are experiencing sticker shock after receiving astronomical increases in their premiums as they come up for renewal. And a local broker says he is already seeing increases of 30 to 50% in renewals for some customers and for some people increases are even higher.

Insurance Commissioner Jim Donelon says he has not approved any increases but expects them to be significantly lower than the aforementioned premiums.

“Going forward I would expect it to be somewhere between that 7% we had last year, 6.7%, and 10% for the next calendar year,” said Donelon. “It’s done on an as applied basis, companies come in, we’ve had some file this January so far, I don’t know the number, but none have been approved as of yet.”

But some homeowners are already getting much higher renewal notices.

“It went from $5,000 to $10,000,” said veteran insurance broker Dan Burghardt as he pointed to one customer’s renewal documents.

To be specific the renewal price went from $5,657.71 to $10,963.12.

“This customer had a policy last year, Lexington Insurance Company the renewal notice as shown here was $5,600 on last year’s coverage and this year it went to $10,963, so that’s a hundred percent jump in cost,” said Burghardt.

It is not an isolated jump in property insurance premiums. Another homeowner insured through UPC Insurance Company provided a document showing the cost of renewing his policy will be $6,724, when it was previously $2,900.

Donelon commented on that particular case.

“I looked at the rate history that UPC has had, and they have had frankly a very much below average rate approval over the five years that they’ve been writing insurance in Louisiana,” he said.

Donelon says insurance companies can reassess insured value on policies.

“Companies have the right under policy to inspect and determine whether or not the insured value on the policy is sufficient to adequately replace that building, that home in the event of a total loss,” he said. There is no law that governs how that process is done or banning the use of inspections to increase the cost.”

He was asked if it was typical that a property value would double, especially quickly.

“I can’t speak to that; I really don’t know. I wouldn’t think so if they’re keeping their insured value up on a regular basis, inspecting and increasing it periodically then, then no,” Donelon stated.

But Burghardt said of what his agency is seeing, in terms, of premiums, “Talking to my agents at the desk level that deal with this day-to-day, the average renewal price is going from 30% to 50% rate increase.”

He said back-to-back years of hurricanes have not helped along with the cost of building materials during the pandemic.

“To put in mildly, claims, to put it mildly, multi hurricane hits in a state,” said Burghardt.

Affordability is a big consideration for many people, but for those thinking about dropping their current insurance company, there are some things to consider.

“It’s a risky business jumping from one market to the next but at the same time there are carriers that are forcing customers to find other insurance carriers,” said Burghardt.

In Louisiana, policyholders who have been with their insurance company for three years cannot be dropped on a whim.

“We’re the only state in America that has that consumer protection law on its books, that three-year rule that says if you’ve been with your homeowners’ company for three or more years you and they are married for as long as they can do homeowners’ business in your state,” said Donelon.

As for the woman with the nearly $11,000 renewal notice, Burghardt found her an option that is close to what she was previously paying.

“We were able to find her a similar rate, but we had to do a lot of looking around,” said Burghardt.

Donelon says property owners have a responsibility to insure to the full value of their property.

“In fact, the law says that you must unless the company agrees to deviate from it, you must insure your property to the full value, replacement cost value of having that property insured. And companies after Katrina, for example, did a widespread increase of the insured value,” said Donelon.

Yet, he said consumers can appeal the value assigned by their insurers.

“Almost all I can definitely say allow for an appeals process, if you believe that your insured value increase is more than is justified,” said Donelon.

He said despite three insurance companies being taken down recently due to financial problems and three more leaving Louisiana voluntarily there are companies still writing coverage.

“It’s part of the challenge of these two huge Hurricane events in the past two hurricane seasons but we feel confident now that the rest of the 24 or two dozen companies are good to go, solvent and willing to write in our coastal areas,” said Donelon.

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