Insurance commissioner offers tips for shopping insurance

Published 12:04 am Wednesday, June 22, 2022

LAPLACE — With nearly 100,000 policyholders losing insurance coverage this summer in the midst of a predicted above-average 2022 Atlantic Hurricane Season, Louisiana Insurance Commissioner Jim Donelon conducted a statewide Storm Tour to offer guidance on insurance-related issues.

When it comes to shopping policies, Donelon urges homeowners to be mindful of price, solvency rating and guaranty fund protection.

According to Donelon, all companies and agents in Louisiana can write for the state market of last resort known as Louisiana Citizens.

“Be aware that Citizens, by law, so that it doesn’t become a market of choice, has to price its rates every year above the rates chosen by the private companies in your area. It is almost in every case the most expensive coverage out there,” Donelon said.

Shopping insurance policies by contacting various agents will give a homeowner a better idea of what is available. While some companies such as State Farm and Farm Bureau have captive agents contracted to work for only one company, independent agents work with multiple insurance companies and can sell coverage from more than one provider.

According to Donelon, every insurance company in Louisiana has a solvency rating either through A.M. Best or Demotech that can provide insight on the financial stability and reliability of the company.

Donelon said it is equally important to determine if the company is admitted into the Louisiana Insurance Guaranty Association, providing a safety net in the event the company becomes insolvent. Approximately 10% of residential policies are written by surplus lines companies that do not offer this layer of protection and are therefore riskier for the property owner.

Lighthouse Excalibur, Maison and Southern Fidelity are three insurance companies that have recently gone belly up. Donelon reported this week that Lighthouse Excalibur and Maison policies will be cancelled on June 30, while Southern Fidelity policies will be cancelled on July 15.

Impacted policyholders can be covered by Citizens, the market of last resort, for any claims occurring June 30 through August 28 for Lighthouse Excalibur and Maison or July 15 through September 13 for Southern Fidelity, as long as an agent binds a new policy with Citizens within 60 days. The extension of coverage does not affect policyholders who obtain a new policy with a company other than Citizens.

Deductibles are another consideration when obtaining insurance. According to Donelon, one-third of the policies in Louisiana come with a 5% hurricane or named storm deductible, which would amount to a $10,000 deductible on a property insured for $200,000. Policyholders may be able to opt for a higher premium to decrease the deductible.

“To the extent that you can afford to self-insure, you should do so. The bigger deductible you can afford to take, the less premium you pay,” Donelon said.

Before evacuating for a storm, Donelon strongly suggests walking through your home and taking pictures of the contents of each room to facilitate the insurance claims process in the event of a loss from fire, wind or flood. If evacuating, it is also helpful to take a copy of your policy to have contact information on hand and begin the claims process.

In April, St. John the Baptist Parish President Jaclyn Hotard testified alongside Donelon before the Senate Insurance Committee regarding Senate Bill 134, which would require insurers to cover evacuation expenses, even when a mandatory evacuation order is not issued, as long as the parish declares an emergency and orders a voluntary evacuation.

Hotard testified, “Hurricane Ida made landfall within 72 hours of becoming a named storm; therefore, a Mandatory Evacuation without coordinated contraflow wasn’t safe or feasible. This bill will keep evacuation orders about safety and not insurance policies.”

Donelon said Senate Bill 134 has passed through to the governor’s desk and is waiting to be signed.

“(Hotard) was very valuable in making that happen because the companies were very opposed to that bill, primarily State Farm and Farm Bureau,” Donelon said.

The insurance landscape is constantly changing, especially in the wake of Hurricane Ida in 2021 and hurricanes Laura, Delta and Zeta in 2020.

“For the five years before Laura hit Lake Charles, premiums went up only 1% per year for homeowners statewide on average. This year, after Laura was factored in to rate filings, the average is 6.7%, largely driven by the cost of reinsurance,” Donelon said. “Another factor in premiums going up is the fact that 64% of properties nationwide are underinsured to the extent of 24% of the true replacement cost it would take to repair their property after a disaster.”

Flood insurance costs are also on the rise under the new system known as Risk Rating 2.0. However, Donelon still urges homeowners to participate in the National Flood Insurance Program.

“Risk Rating 2.0 has price increases throughout the state, but it is still overall the best insurance for any property owner in our state,” Donelon said. “The program, since the ‘60s, has benefitted Louisiana more than any other state in the history of the program. Unfortunately, only 25% of the homes in Louisiana are insured for flood.”

For more information from the Louisiana Department of Insurance, visit https://www.ldi.la.gov/.