Louisiana’s Home Insurance Market Continues To Struggle Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: On This Page
Sean Rayford/Getty Images November 10, 2022 Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent. Maggie Kempken is an insurance editor for Bankrate. She helps manage the creation of insurance content that meets the highest quality standards for accuracy and clarity to help Bankrate readers navigate complex information about home, auto and life insurance. She also focuses on ensuring that Bankrate’s insurance content represents and adheres to the Bankrate brand. Bankrate logo The Bankrate promise
At Bankrate, we strive to help you make smarter financial decisions. To help readers understand how insurance affects their finances, we have licensed insurance professionals on staff who have spent a combined 47 years in the auto, home and life insurance industries. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation of how we make money. Our content is backed by LLC, a licensed entity (NPN: 19966249). For more information, please see our Insurance Disclosure. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our insurance team is composed of agents, data analysts, and customers like you. They focus on the points consumers care about most — price, customer service, policy features and savings opportunities — so you can feel confident about which provider is right for you. We guide you throughout your search and help you understand your coverage options. We provide up-to-date, reliable market information to help you make confident decisions. We reduce industry jargon so you get the clearest form of information possible. All providers discussed on our site are vetted based on the value they provide. And we constantly review our criteria to ensure we’re putting accuracy first. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Bankrate logo Insurance Disclosure
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. From the haunting bayous to the lively streets of New Orleans, Louisiana has an appeal that few states can match. But Louisiana’s position along the Gulf Coast and the low-lying areas along its southern border makes it particularly vulnerable to hurricane damage. Because of the risk of storm damage, the state’s home insurance market is facing challenges. Bankrate investigated the situation and spoke with several insurance experts to understand what’s happening and how it impacts Louisiana homeowners. Compare rates and save on home insurance today! Get quotes Close X This advertisement is powered by Coverage.com, LLC, a licensed insurance producer (NPN: 19966249) and a corporate affiliate of Bankrate. The offers and links that appear on this advertisement are from companies that compensate Coverage.com in different ways. The compensation received and other factors, such as your location, may impact what offers and links appear, and how, where and in what order they appear. While we seek to provide a wide range of offers, we do not include every product or service that may be available. Our goal is to keep information accurate and timely, but some information may not be current. Your actual offer from an advertiser may be different from the offer on this advertisement. All offers are subject to additional terms and conditions. Compare home insurance rates
Answer a few questions to see personalized rates from top carriers. Continue Powered by Coverage.com (NPN: 19966249) Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Quick Facts $382/year average savings through Bankrate 2 out of 3 homes are underinsured 1 out of every 20 insured homes makes a claim each year 100% of homes need insurance before getting a mortgage Bankrate See more providers in Choose from insurers in Show More Mortgage Leaving so soon Your custom quotes are just minutes away
Return to form This advertisement is powered by Coverage.com, LLC, a licensed insurance producer (NPN: 19966249) and a corporate affiliate of Bankrate. The offers and links that appear on this advertisement are from companies that compensate Coverage.com in different ways. The compensation received and other factors, such as your location, may impact what offers and links appear, and how, where and in what order they appear. While we seek to provide a wide range of offers, we do not include every product or service that may be available. Our goal is to keep information accurate and timely, but some information may not be current. Your actual offer from an advertiser may be different from the offer on this advertisement. All offers are subject to additional terms and conditions. Compare home insurance rates
Answer a few questions to see personalized rates from top carriers. Continue Powered by Coverage.com (NPN: 19966249) Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Quick Facts $382/year average savings through Bankrate 2 out of 3 homes are underinsured 1 out of every 20 insured homes makes a claim each year 100% of homes need insurance before getting a mortgage Bankrate See more providers in Choose from insurers in Show More Mortgage Leaving so soon Your custom quotes are just minutes away
Return to form Insurance Home Key insights At least six property and casualty home insurance companies have been declared insolvent since August 2020. Citizens, Louisiana’s “last-resort” insurer, which already charges higher rates than the private market, is implementing a staggering 63 percent rate increase starting on January 1, 2023. Future hurricane predictions could increase the risk of property insurers going insolvent in an unstable market. What is happening to the Louisiana home insurance market
Many are rethinking their ability to write coverage in the risky state. The risk in Louisiana has already caused a handful of companies to go insolvent, while the remaining companies have paused writing new business or exited the state completely. This environment is limiting homeowners options for insurance coverage. Jim Donelon, the Commissioner of Insurance for the State of Louisiana, spoke with Bankrate about the current situation. “We are challenged, no question about it,” he says. There is a very hard market out there to get coverage. — Jim Donelon While other states have experienced home insurance difficulties — the continues to worsen — each situation is unique. Let’s take a look at what is happening in Louisiana. Why are insurance companies struggling in Louisiana
So what exactly is causing the nervousness among insurers? In Louisiana, it all boils down to storm risk. Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute, explains: “The insurance crisis in Louisiana is driven by excessive property claim losses from hurricanes, which had devastating effects for small, regional home insurers that were under-capitalized.” Donelon agrees, noting that at least six companies have gone insolvent since Hurricane Laura in August 2020. While losing six companies might not seem severe, Donelon also points out that there’s no way of knowing how many companies have paused their business operations. Hundreds of thousands of policyholders have been affected, and more could follow. Hurricane risk
For most companies exiting Louisiana’s market, the reason is simple: the state is too risky. Donelon notes that Louisiana “had a really long, quiet period of hurricane seasons until 2020.” The home insurance market may have begun to calm a bit after the challenge it faced in the wake of Hurricane Katrina in 2005. Because less damage was happening, the companies may have been able to charge comparatively lower rates and maintain lower claims reserves (the money set aside to pay claims). But 2020 and 2021 brought four devastating hurricanes in a row — Laura, Delta, Zeta and Ida. These four storms caused of damage in Louisiana. About 72 percent, or $55 billion in damage, was from Hurricane Ida, which hit the state in late June 2021. The rapid increase in risk level — not to mention the massive influx of claims — was enough to financially cripple at least six property and casualty insurance companies. Even companies fiscally strong enough to withstand the barrage of losses may not be willing or able to handle another hurricane season. This has resulted in companies withdrawing or pausing their writing in our property insurance market. — Jim Donelon And it’s likely to get worse. According to the , hurricanes have increased in duration, frequency and intensity since the 1980s and are predicted to continue getting stronger. As the risk of widespread damage increases, it could be less likely that insurance companies will want to do business in Louisiana. Reinsurance costs
Louisiana’s home insurance market operates, in large part, based on . Reinsurance is a type of insurance coverage your insurance company purchases to protect itself from the financial risk of claims. Essentially, reinsurance means the less-risky areas of the world are helping to subsidize the ability of insurance companies to operate in more risk-prone areas. But reinsurance costs money, just like any other insurance policy. Insurance companies are paying more for reinsurance due to the increasing frequency of natural disasters worldwide. Donelon confirmed that reinsurance rates are rising and that insurance companies will likely pass on some of that cost to policyholders in the form of higher rates. What is being done to curb the crisis
While all of this sounds scary — and it’s certainly far from ideal — Louisiana is taking action that will hopefully stabilize the market. Lee Ann Alexander, Vice President of State Government Relations at the American Property Casualty Insurance Association (ACPIA), talked with Bankrate about the insurance bills included in the 2022 Louisiana Legislative Session. She says, “[The legislators] have raised the financial commitments that companies have to make to participate in the state to ensure that this type of thing doesn’t happen with such frequency, and that’s important.” Essentially, this means that insurance companies will have to prove a higher level of financial stability to be granted access to write policies in the state. That makes it less likely that the companies will be devastated by widespread hurricane losses. What should Louisiana homeowners expect
Louisiana already has the sixth-highest in the country at $2,009 per year for $250,000 in dwelling coverage. That’s 45 percent higher than the national average of $1,383 per year. nationwide to keep pace with inflation, and Louisiana’s risk level poses an additional layer of consideration for home insurers as they set rates. Louisiana insurers can’t use past hurricane losses to justify rate increases, but they can use future predictions. If you are a , you may need coverage through Louisiana’s last-resort insurance company, Citizens. Be aware that the company is mandated to charge higher rates than the private market, so coverage is expensive. To make matters more complicated, Citizens announced that it is going to increase home insurance rates by an astounding starting on January 1, 2023. Any new policies written on or after that date will be rated with the higher rating formula. Existing policies will experience the rate increase at the first renewal after January 1. There’s no sugarcoating it — this increase is extremely painful but required by law to make sure Citizens can handle a potential future disaster for its many policyholders. — Jim Donelon Despite sky-high rates, Citizens may be the only option for home insurance for many Louisiana residents. The company is designed to handle the influx of policies during riskier times and works to depopulate these policies back to the private market when the risks lessen, but that doesn’t mean it doesn’t have to take action when it has more policies than expected. The increased rates for Citizens policies is intended to ensure it has enough funds to pay out claims should a hurricane cause widespread damage. Nicole Ganley, Assistant Vice President of Public Affairs at the APCIA, also points out the importance of reviewing your financial situation. “Make sure your finances are up to date,” she says. “Make sure your policies are up to date; go make sure you have enough coverage. Inflation is having a huge impact.” The bottom line
Louisiana has always been a challenging state, even for the . However, the string of four devastating hurricanes between 2020 and 2021 has pushed many insurers to the point of collapse and encouraged others to voluntarily leave the state. I think what you’ll see moving forward is a state that continues, unfortunately, to be in harm’s way. — Lee Ann Alexander Donelon is hopeful, though, that the state will be able to attract smaller home insurance companies to fill the void left by the carriers leaving. He understands the issues on an intimate level; he was among the homeowners who lost coverage due to a failing company. “It’s tough; it’s hard,” he says. “But hopefully — prayerfully — we can get through another hurricane season without the events of the past two years.” SHARE: Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent. Maggie Kempken is an insurance editor for Bankrate. She helps manage the creation of insurance content that meets the highest quality standards for accuracy and clarity to help Bankrate readers navigate complex information about home, auto and life insurance. She also focuses on ensuring that Bankrate’s insurance content represents and adheres to the Bankrate brand. Related Articles