Louisiana Hurricane Insurance Struggles

Hurricane season in Louisiana is in full swing, and forecasters say the 2022 hurricane season will likely bring more storms than average. Homeowners should have an emergency evacuation plan and brace for property damage if a hurricane does hit Louisiana. Unfortunately, some property owners can’t adequately prepare because their insurance companies have gone belly up. Thousands of Louisiana policyholders are still waiting to be reimbursed for damage incurred during Hurricane Ida last summer. In some cases, their homes are still unlivable. Louisiana will likely see devastating storms before the year’s end, which is bad news for property owners still recovering from last year’s hurricane season. These homeowners will be more vulnerable to further damage.

Louisiana Insurance Companies Going Out of Business

You pay a home insurance deductible, understanding that you’ll be protected after a Louisiana hurricane. In most cases, insurance companies can pay out claims. But sometimes, insurers — often smaller ones — cannot weather an intense hurricane season. Four insurance companies have declared bankruptcy since Hurricane Ida, which caused tens of billions of dollars in damage. Lighthouse Excalibur, an insurance company that canceled all of its policies last month, expected Ida to cost $200 million. In reality, it cost the company $440 million. Insolvency may be the only option if an insurance company is overwhelmed by claims. 

Safeguards are in place for consumers whose insurance companies go out of business. When an insurer becomes insolvent, the state steps in to help the consumers who are left hanging. First, the Louisiana Department of Insurance places the company into receivership, which gives the state government control of the insurer’s assets and debts. 

Then, they’ll use funds from the Louisiana Insurance Guaranty Association to pay out claims. The state established the non-profit in 1971 and provides a safety net for insurance companies and policyholders. Insurers pay a percentage of revenue to the organization every year. Louisiana uses those funds to pay out claims up to $500,000 per policyholder when an insurance company goes bankrupt. The state also finds private insurers willing to take over the policies of affected insurance holders.

Louisiana Insurance Costs Rising

Insolvent insurance companies aren’t the only problem Louisiana homeowners are facing. Consumers are dealing with skyrocketing premiums as insurers raise their rates in anticipation of hurricane season. Some property owners have seen their annual premiums double and even triple. Insurers in Louisiana aren’t allowed to raise premiums because someone files a natural disaster-related claim. Still, costs can increase because of market changes. Homeowners are left scrambling to insure their properties.

Louisiana is taking steps to address the problem. The state legislature increased the minimum insurer capital and surplus to $10 million by 2031, meaning insurance companies will need more money to remain licensed property insurers. The state-run Louisiana Citizens Property Insurance company is an option for homeowners who lose their insurance coverage and can’t find replacement policies. It’s important to note that Louisiana Citizens is an “insurer of last resort” and, as a result, more expensive than private insurance. Unfortunately, homeowners don’t always have a choice.

Homeowners insurance isn’t mandatory in Louisiana, but it’s ill-advised to go without coverage. Mortgage companies require proof of an insurance policy until a home is paid off. If you own a property outright, insurance isn’t required but is still essential. Louisiana natural disasters are unpredictable and often devastating. Being uninsured means paying out-of-pocket to get your home back to its pre-storm condition.

As a property owner, you pay thousands of dollars yearly to an insurance company to be protected if the worst happens. An insurance company fails to uphold its end of the deal when they go out of business, cancel your policy, or refuse to pay a fair settlement. It leaves you wondering what legal options you have. The Herman, Herman & Katz property damage attorneys help Louisiana homeowners and business owners get the insurance money they deserve. Contact us online or call us toll-free at 844-943-7626.