Many New Orleanians Unable to Find Affordable Insurance

Attorney Vallie Schwartz fell in love with the 130-year-old Victorian shotgun in New Orleans’ French Quarter, which like all grand houses in this former Spanish enclave has tall, cathedral ceilings and brightly painted cypress shutters.

A successful personal injury lawyer, she could comfortably afford the mortgage on the half-million-dollar house, so she made an offer – one that was soon accepted.

That was before she knew how much it would cost to insure the property: The best quote she got from a private insurer was nearly $10,000 per year, or over $800 a month on top of her monthly mortgage – far more than she had budgeted and enough to price her out of the house.

“I’m in the higher income bracket in this city, and I can’t afford that. I just saw my money floating out the window,” says Schwartz, who pulled out of the deal and is still living in a rental one year after losing her house to flooding.

To a bruised economy still reeling from Hurricane Katrina, add the most recent challenge: Finding affordable insurance. With private insurers retreating from this hurricane-scarred region, residents in New Orleans are facing a new economic reality.

Mortgage brokers are penciling in hundreds of extra dollars to the New Orleans loans they’re writing to account for soaring insurance premiums. Those living in condominiums are being slapped with hefty increases in their condo dues, the result of a spike in the buildings’ wind and fire coverage. Hotel and inn owners are paying more, too – an especially heavy burden at a time when tourists are scarce.

Most affected of all are new homebuyers, who are trying to secure insurance in a landscape few insurers will touch.

“It used to be the conversation went, ‘What’s the price? What’s the square footage? And where is it located?”’ says local real estate agent Richard Jeansonne, co-owner of French Quarter Realty. “Now the conversation is, ‘What’s the price? What’s the square footage? Did it flood and can I get insurance?”’ he said.

Often, the only insurance new homebuyers in New Orleans can get is through the expensive state-run pool. That pool, modeled after one created in Florida in the aftermath of Hurricane Andrew, was meant to be the option of last resort; by statute it charges 10 percent more than the top private insurers in any given region.

But as of last month, Florida’s pool became the No. 1 insurer in that state with 1.2 million policies. In Louisiana, the state’s pool, known as Louisiana Citizens Property Insurance Corp., is receiving 400 new applications a day and is expected to spike to 200,000 policies by year’s end, a 63 percent jump from 2005 when it had 135,000 policies. Dealing with the state-run pool is also an added hassle: It takes between three to five weeks for an application to be processed and with a ballooning work load, homeowners can rarely get through the jammed phone lines to speak to customer service.

“Rather than the last resort, it’s become the market of only resort,” said Robert Page, an insurance broker who heads the state chapter of the National Association of Professional Insurance Agents.

The lack of affordable options has led some homeowners to buy houses just outside the New Orleans city limit, where private insurers are still accepting new customers.

With another baby on the way, Andrea and Luis Espozito had outgrown their 1,200-square-foot condominium in New Orleans and were looking to buy a house in the Garden District, the upscale neighborhood of colonnaded mansions once home to vampire chronicler Anne Rice. They quickly learned that a 3,000-square-foot house listed at under $1 million would come with a $17,000-a-year insurance premium.

So they did what many proud New Orleanians would consider unthinkable: They moved to Metairie, a suburb nine miles outside New Orleans. There, they bought a 3,000-square-foot house that put them back $6,000 a year in insurance – still high, but far more affordable than the city rates.

“When someone calls me asking for a quote, the first thing I ask is, ‘What’s your zip code?’ Unfortunately, your zip code is your zip code. There’s no way around it,” says insurance broker Juliana Williamson of Parish National Insurance Agency, a local broker.

Those intent on staying within a City of New Orleans zip code are drastically revising how much house they can afford.

Tulane University professor Claudiney Pereira thought he’d found a deal: A house within walking distance of the classroom where he teaches macroeconomics. He made an offer, a closing date was set and the professor bought cardboard boxes in anticipation of his move.

But like so many others, the deal was derailed when he discovered the only coverage he could get was through the state-run plan and would cost him $400 on top of his $1,800-a-month mortgage. Now, he and his wife plan to look for a house that’s 30 percent cheaper – a budget that likely will price him out of the neighborhood, forcing him to drive, instead of walk, to work.

To be sure, there are other financial factors at work. Both the Pereiras and the Espinozas balked at the high property taxes in the Garden District, while in the 300-year-old alleys of the French Quarter, attorney Vallie Schwartz knew she would also need to budget for parking, as well as for the price of new furniture. Like many in New Orleans, she lost everything when her home on the shores of Lake Pontchartrain flooded last year.

The impact of insurance on New Orleans mirrors what’s already happened in hurricane-prone Florida.

There, insurance is to blame, say experts, for the what may be the beginning of an exodus from the Florida Keys. Over the last five years, over 4 percent of the population of Monroe County, which encompasses the Keys, has uprooted itself, according to census figures.

Residents there speak of insurance premiums doubling every year, forcing some homeowners to “go naked” – having no insurance at all. Realtors say inventories are at more than double what they were a year ago and “For sale” signs seem never to come down.

One of them is now pitched outside the home of Barbara and Harold Polsky in Port Richey, Fla., who began packing their bags, planning to move to Roanoke, Va., after their insurance premium doubled this spring.

“It broke our hearts to put up that sign. My wife hoped to die in this house. We love it here, but we just can’t afford it anymore,” said Polsky, 49. “I know what’s coming in New Orleans because we’re living it now.”

Editors Note: To mark the first anniversary of Hurricane Katrina Aug. 29, Associated Press business writers report on the challenges faced by Gulf Coast businesses and consumers.