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The eye of Louisiana's insurance storm

Louisiana’s geographic location along the Gulf Coast — which is susceptible to catastrophic weather events like hurricanes and tropical storms — presents challenges for both homeowners and insurance companies.

In 2020 and 2021, the Pelican State was battered by a string of devastating hurricanes — including Laura, Delta and Zeta — and several other named storms that caused billions of dollars in insured and uninsured damages.

Temple says the four mammoth hurricanes over a 12 month period triggered an “unprecedented” explosion of 800,000 property insurance claims, which caused 12 insurers operating in the state to go insolvent.

“Those are 12 markets that took consumers’ premium dollars with a business plan that was supposed to pay claims and they didn’t,” Temple told state lawmakers.

When the number of insurers in a market shrinks, this can have several detrimental impacts on consumers — as Trotter and many other Louisiana residents have discovered in recent years.

Less competition often leads to higher prices for insurance products and services. In addition, when there are fewer options, consumers may struggle to find policies that meet their specific needs — or even get coverage at all.

“I think it’s the deepest, most profound insurance crisis that all of our citizens are facing,” Temple said. “The average citizen in Louisiana spends more of their paycheck buying insurance than other states, so that’s the crisis that we’re facing.”

According to a Bankrate analysis of data from Quadrant Information Services, the average cost of an insurance policy with $250,000 in dwelling coverage for a home in Louisiana is $3,247 annually, which is about 85% higher than the national average of $1,759 per year.

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Fixing a broken system

For Trotter, the cost of home insurance grew too high. She was forced to sell her home and move into a mixed-income apartment.

“There’s hundreds … or thousands of people who are experiencing the exact same situation [as Trotter],” John Ford of the state's insurance department told WDSU News. “It’s a really difficult time right now.”

But he also insisted Temple has a plan for how to lure more insurers to the state and for insurers already operating in Louisiana to do more business.

“The more insurance companies we have writing here, the more competition we’ll have [and] the quicker we’ll be able to stabilize rates in the market,” Ford said.

Temple’s plan would involve eliminating a rule that stops insurance companies from dropping customers who have held a policy with them for at least three years. The former insurance exec also suggested a change that would allow insurers to make pricing changes according to the economy and without prior approval. According to WDSU News, critics are concerned Temple’s proposals would hurt customers further by taking away certain consumers rights and granting more flexibility to the insurers. Ford insists the goal is to make Louisiana more attractive to insurers.

Either way, people in the state are hurting right now. As Trotter pointed out: “It’s going to be a sad situation in the state of Louisiana.”

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About the Author

Bethan Moorcraft

Bethan Moorcraft

Reporter

Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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