La.’s Citizens Gets OK to Raise Rates

Louisiana’s state-run insurer won approval for big rate increases on Jan. 17, meaning double- and triple-digit hikes in insurance costs for homeowners and businesses along the coast.

The increases for Citizens Property Insurance Corp. will immediately affect about 140,000 homeowners and 1,230 businesses – but the changes are likely to have a far broader impact because Citizens is growing rapidly as private insurance companies reduce the number of policies they write in Louisiana.

Citizens is a quasi-state agency that insures people and businesses who can’t get insurance from private firms. The company has taken up the slack created by private insurers since hurricanes Katrina and Rita in 2005. With new office space and newly hired staff, the company can now write 1,000 policies per day and expects to write between 60,000 and 200,000 over the next year, said Terry Lisotta, secretary of Citizens.

Citizens won approval of the rate hikes from the Louisiana Insurance Rating Commission, whose members noted that their powers to reject a Citizens rate increase request are limited by the 2003 state law that created the company. The commission has strong regulatory powers over private insurers, but the law gives commissioners little or no power to reject Citizens’ requests for rate increases.

“I want the citizens of Louisiana to know: this was approved by the Legislature, and this is the law,” commission member Joe Godchaux Jr. said.

The Citizens rate changes, computed as a statewide average, include:

-138.4 percent higher rates for commercial property insurance, equaling $2.35 million for 1,230 policyholders.
-A 7 percent increase on homeowners policies that exclude wind coverage, equaling $13.2 million for 135,000 policyholders.
-68.2 percent higher rates for homeowners with “wind damage only” policies, $26,000 for 440 policyholders.

The commission also approved a 58 percent increase for the Hanover Insurance Company, a Worcester, Mass.-based firm, for its homeowners policies. Hanover raised its rates by 9.8 percent last year – an increase that did not require the regulators’ approval, because they have no power over hikes smaller than 10 percent.

Hanover is the state’s ninth-largest homeowners insurer, with 18,600 policyholders.