Louisiana Citizens Wants to Rid Itself of High Deductible Non-Hurricane Damage Coverage

Louisiana Citizens Property Insurance Corp. may soon end the longstanding, and apparently unique, practice of selling policies that include a $10,000 deductible for non-hurricane damage.

Chief Financial Officer Steve Cottrell tells The Advocate the percentage of personal lines policies with the $10,000 deductible has grown by 35 percent in the past two years, although the state-backed company’s overall policy count has fallen by 12 percent.

The company now has about 6,300 policies with $10,000 deductible, or 7.7 percent of the company’s entire book of business. Next year, Citizens expects to shed 10,000 of its 86,000 policies, making the contrast even greater.

“I believe we’re not servicing the company well and in most cases, we’re not servicing the customer well because they don’t understand that they’re not buying much insurance,” Cottrell said. “They’re buying hurricane insurance. That’s about it.”

Cottrell spoke to a Citizens’ Executive Committee meeting.

Citizens is the only one of the state’s 10 largest insurers that offer a $10,000 “all other perils,” or AOP, deductible, which covers everything but hurricane damage, such as fire and hail claims, Cottrell said. The highest deductible other companies offer for non-storm damage is $5,000.

It’s unclear when Citizens began offering the policies or why, Cottrell said.

What is clear is that people buy the coverage to try and save money, interim Chief Executive Officer Vijay Ramachandran said. But the coverage is not cheap.

The average premium is close to $6,700 a year. Meanwhile, Louisiana homeowners pay an average of $1,722 for coverage.

Cottrell said one mobile home owner bought a high-deductible policy even though the home’s contents are valued at $7,000. Another high-deductible policyholder’s home is worth $20,000.

Customers don’t realize they will have to pay for the first $10,000 worth of repairs, Cottrell said.