Customers of Citizens, Louisiana’s insurer of last resort, will get a much-needed break on rate hikes next year, after lawmakers passed a bill temporarily pausing the surcharges they normally must pay.
But preliminary data from Citizens shows that while some will get relief, the rising premiums that have become ubiquitous in south Louisiana have continued in recent months. That means Citizens customers in some parishes will still see their costs go up, even though they will pay 10% less than they would have without the legislative relief.
The reduction, which will begin to take effect upon renewal in January, comes as costs have remained stubbornly high, both for Citizens customers and homeowners who buy insurance from private insurers.
A Times-Picayune analysis of Citizens data shows customers paid 8% more on average in May compared to last summer. And New Orleans, long the epicenter of the crisis, has been hit particularly hard. The average premium has risen $561 per customer over that period. The increases can be attributed to a wide array of factors, including rate hikes and the churn of policyholders on and off the rolls of Citizens.
In all, the average Citizens policyholder in Louisiana pays $2,800 more a year on average than they did when Hurricane Ida hit in 2021. That’s an increase of 164%.
Rates skyrocketed after the hurricanes of 2020 and 2021 set off a wave of collapses, with 12 insurers going belly-up and Citizens’ rolls swelling. Since Ida, 91,426 policyholders have been added to Citizens’ rolls, and the average cost of a policy has risen by a staggering $2,800, to more than $4,500 a year.
Joe Sciortino, Citizens’ chief financial officer, said the rise in the cost of reinsurance – which backstops insurance companies’ losses from big disasters – has caused prices to spike in recent years. He said reinsurance may be starting to level out, though.
“It’s still high,” he said. “But we are seeing a little bit of softening this year compared to past years. … Each year that you’re storm-free, it gets a little bit better.”
State Republican leaders ushered in a set of new laws aimed at making it easier for insurance companies to drop policyholders and raise rates, with the hope that allowing insurers to better manage their risk will increase competition in the market. Residents of south Louisiana currently have only a handful of options, if any, besides Citizens.
Insurance Commissioner Tim Temple championed the package of bills, which Gov. Jeff Landry signed into law this spring. Starting next year, insurers will be able to drop up to 5% of their policyholders who are currently subject to the "3-year rule," which prohibited insurers from dropping people who were long-time customers.
But the plan has raised fears that thousands of homeowners will be dropped from coverage and forced onto the rolls of Citizens, where state law requires them to pay rates 10% above market. Temple agreed during the session to a Democratic-backed measure to suspend the 10% premium for Citizens for three years.
Data from Citizens shows the net outcomes for policyholders will depend heavily on where they live. For instance, Orleans Parish saw the average policy increase by about 11% compared to last summer, but with the cancellation of the 10% surcharge, most customers will see costs fall again by about 10% next year because of the new law. Likewise, Jefferson Parish will roughly see premiums that have increased by about 7% offset by the reduction.
Conversely, St. Martin, Livingston and Cameron parishes are slated to see big increases – of 25%, 24% and 12%, respectively. Those hikes would be higher if not for the new law.
Sciortino said the numbers are preliminary and will change as the end of the year approaches and Citizens finalizes its rates.
John Ford, spokesperson for the Insurance Department, said that because Citizens develops rates by parish, differences in the costs are expected.
“The 10% discount is better than no discount, but the reality is that many people are experiencing extreme financial stress right now,” Ford said. “The real solution is a competitive market that attracts insurers and stabilizes Citizens’ premiums, and Commissioner Temple is focused on making that happen.”
