As coastal communities brace for another hurricane season, state officials are considering a $100 million enticement for insurance companies, while homeowners who suffered no damage from hurricanes Katrina and Rita struggle with higher premiums and canceled wind coverage.
At first, policies of homeowners in hurricane-ravaged areas along the coast were dropped, forcing them to the more costly Louisiana Citizens Property Corp., the state's insurer of last resort.
Nelson Potier's house south of La. 14 near Erath in Vermilion Parish escaped Rita's wrath. Farm Bureau canceled his coverage anyway, forcing him to Citizens Property Insurance Corp. His homeowners policy went up from $1,100 a year to $2,900 a year, and he said his coverage is not as good.
That's been the story with many coastal residents, especially south of La. 14 in Vermilion Parish, where many homes were flooded by Rita's storm surge. Now, homeowners in unaffected areas like Lafayette are feeling the pinch, too.
Chasity Hooks has lived in the Saint Streets area of Lafayette near the Cajundome since 1996. Since 2005, she has paid Allstate to insure her home and two automobiles.
Her home escaped Rita unharmed, but Allstate increased her premium by $600 a year, which Hooks paid.
"Then, I get a letter a few weeks ago saying, 'By the way, we're not covering wind and hail anymore,' " she said.
Homeowners like Hooks who pay a mortgage must have the coverage. That forces them to seek supplemental coverage from another company, if they can find it, or resort to Citizens insurance.
"The insurance industry is the only industry I know where, if the company actually has to provide the service they charge you for, they can drop you for using the service," Hooks said. "It's absolutely outrageous and should be illegal."
State legislators in session now are considering several bills to address the situation, including a $100 million enticement for insurance companies proposed by the governor and insurance commissioner; a state catastrophic fund paid by the insurance companies proposed by Sen. Nick Gautreaux, D-Meaux; and a regional deductible based on proximity to the Gulf and a consumer bill of rights, both proposed by Sen. Donald Cravins Jr., D-Opelousas.
The proposal by Gov. Kathleen Blanco and Insurance Commissioner Jim Donelon would appropriate $100 million in the Louisiana budget to entice new, smaller property insurers to the state to take the burden off Citizens insurance. A company must agree to at least a $2 million investment in Louisiana to qualify. The state would match its investment dollar for dollar.
"We're trying to get the private market back into the business of insuring these people" on Citizens insurance, said state Sen. Craig Romero, R-New Iberia. "We're trying to do everything we can to get the state out of the insurance business."
Gautreaux's legislation would establish a state catastrophic or reinsurance fund, which he said will expand coverage, provide long-term stability, increase competition, prepare consumers for a future catastrophic hurricane and save customers money.
Opelousas Mayor Donald Cravins Sr., an insurance agent and former state senator, said state leaders again are not offering a comprehensive package to address the insurance crisis. Again this session, the legislation proposed is piecemeal, he said.
"You don't want to meddle too much in free enterprise, but what about the people?" he said. "They're angry and nobody seems to offer any real, meaningful, comprehensive package to deal with it."
Some, like Vermilion Parish homeowner Nelson Potier, say federal action is needed because it's not just a local problem.
U.S. Rep. Charles Boustany, R-Lafayette, said congressmen from coastal states are discussing the problem, but no formal hearings are scheduled on legislation.
"I am very concerned about it. People are losing their coverage completely," he said. "Many home and business owners are paying much higher premiums. We have a looming insurance crisis here."
United Policyholders, a nonprofit group formed in 1991 to assist consumers, has received many complaints from Louisiana residents about homeowners insurance, said Amy Bach, executive director.
"You are experiencing one of the worst post-hurricane disasters in insurance that I've experienced in 25 years," she said. "Citizens of the state have to speak out and put pressure on elected officials in the state."
