NU Online News Service, Jan. 19, 12:50 p.m. EST
Louisiana Citizens Property Insurance Corp. has proposed a 10.5 percent overall increase to homeowners-insurance rates in order to correct inadequate rates for wind-and-hail coverage, according to Richard Robertson, CEO of the state-run, last-resort insurer.
"We're not supposed to be competitive in the marketplace, and we feel that were being more competitive than we wanted to be, especially on the wind and hail," Robertson says.
Citizens' board voted 6 to 2 to file the rate-increase proposal with the Department of Insurance. State insurance commissioner Jim Donelon says he expects to make a decision on the request by the end of the month.
"I will add that, anecdotally, I'm being told by agents that Citizens' combinations of homeowners policies combined with wind-and-hail coverage purchased from Citizens is cheaper than private sector full policies," Donelon says.
Citizens' presentation to its board notes that agents and associations are indicating that customers are able to purchase a wind-and-hail-only policy from Citizens for less than the cost of a full-coverage homeowners' policy in the private market.
Citizens seeks to establish a market rate for wind-and-hail-only policies, which, Robertson says, is difficult to accomplish because few other companies offer coverage for just wind and hail. Citizens Chief Financial Officer Steve Cottrell says the last-resort insurer looks at market costs of full homeowners' policies and policies excluding wind-and-hail coverage to find the cost difference for wind-and-hail-only coverage.
Citizens has between 80,000–85,000 customers with coverage other than wind and hail, and around 30,000 customers who have wind-and-hail-only coverage.
Under Citizens' rate-increase proposal, FAIR Plan rates would increase 10.8 percent overall, but only 2.3 percent for plans excluding wind and hail coverage. Coastal Plan rates would increase 7.2 percent overall, but only 3.8 percent for plans excluding wind-and-hail coverage.
If Donelon approves or modifies the request, Citizens will then ask its board to approve the commissioner's decision, and the new rates would go into effect June 1.
Donelon serves in an oversight role for Citizens. He is responsible for hiring the insurer's CEO and making sure Citizens qualifies for tax-free bond status under the Internal Revenue Code. "What I don't have is the authority to set the rates that Citizens charges. The law is specific in that regard, and it says that Citizens must adjust its rates annually," Donelon says.
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