PrintInsurance Challenges
Insurance coverage for homeowners in hurricane prone areas is becoming one a major policy challenge. As it turns out both instructors have their own insuance nightmare stories to tell.
The recent and ongoing cost increases for homeowner’s and flood insurance coverage in coastal Louisiana (including metro New Orleans), coupled with collapse or relocation of some insurance companies, is negatively impacting ordinary, working people who live in the area. Dinah’s experience may be “average” compared to her neighbors, some of whom have suffered much greater heartache and loss following Hurricane Ida in 2021. Ida hit the Louisiana coast as a category 4 storm, wrecking the Gulf town of Grand Isle and leaving a wide swath of flooding and wind damage in its wake as it traveled inland. Jogging close to New Orleans, it wreaked havoc in the western suburbs of the city, leaving tens of thousands of damaged roofs, not to mention cutting power and water for weeks. Then came the insurance nightmares, playing out over the next couple of years. Dinah had a homeowner’s policy with a company that left Louisiana because of Ida’s losses. Although this insurance company did cover the cost of the repairs, including a new roof, a new homeowner’s policy had to be found. As of 2023, the cost of the new homeowner’s policy is approximately 3 times the cost of the original one at over $3,000 annually. Many families cannot afford these policies, and some go without. This results in neighborhoods sporting blue tarps for years after a storm as repairs are unaffordable for many families.
Meanwhile, flood insurance has increased steadily each year (FEMA's updated Risk Rating 2.0 is allowed to impose an 18% annual increase to existing policies). Dinah’s house is in flood zone X and does not require a flood insurance policy, but recent experiences in Louisiana mean it is wise to carry flood insurance in this location. The house is a few blocks from the Mississippi River levee and close to much lower ground and flood zone AE. Dinah’s family also has a small home in coastal Mississippi (flood zone AE), built recently and elevated to 20 feet (3 feet above the required base flood elevation). Flood insurance on this property under the new National Flood Insurance Policy is $4,000 annually. Again, this is a modest house and built with flood mitigation in mind. Other properties are much more costly to insure or are uninsurable because they do not meet minimum elevation requirements. In some cases, families use cash to purchase homes and go without insurance. It is clear as Dinah looks around and talks to neighbors that these increasing costs are having a deep impact on the housing market, changing what were previously modest neighborhoods in coastal areas into places only the wealthy can afford, and many properties are bought by companies that make rental money from them. This is happening all around the coastal areas of the U.S. and impacting millions of people.
Tim’s insurance nightmare started after hurricane Fran sent a 150 foot red oak tree onto his Chapel Hill house at 2AM on September 6th 1996. The tree caused extensive roof damage and water damage in the house. Ceilings were wrecked and carpet was damaged. He contacted his insurance companies, one of the largest insurance companies in the country, and they came out to the house within days and promised to help restore the damage. It was a shock when a letter from the adjustor arrived with estimates of what the company would pay. 54 cents a square foot for ceilings to be repaired, a few hundreds of dollars for the roof. This was insult to injury for Tim and his family who had endured to trauma of a massive tree hitting their roof followed by 10 days without power in sweltering heat.
This anecdote is sadly very common for home and business owners who have been impacted by storm damage and the situation seems to be getting worse as coastal areas have become increasingly developed and storms more devastating. In fact, insurance companies themselves have been faced with major financial losses resulting from major hurricanes. Homeowners’ premiums have risen sharply, and in several cases, insurance companies have left states such as Florida and Louisiana because business is not profitable. This leaves states in a real bind as these two videos show.
Video: Florida Faces Insurance Crisis From Hurricane Ian (7:56)
the initially insurance carriers will come in we'll probably have somewhere between 20 and 25 carriers ago and they'll probably set up an RVs and they will start writing checks initially that will be living expense money this will be the dollars just to help people go find a place to live sustenance dollars uh then you'll be signed up where adjusters will come and inspect the damage sounds easy but it is not so easy a real estate data company estimates 28 to 47 billion dollars in losses from that hurricane are expected it is the costliest Florida storm since Hurricane Andrew back in 1992. many hard hit by the hurricane simply don't have the insurance they're going to need to rebuild the New York Times reports in the counties whose residents were told to evacuate just 18.5 percent of homes have coverage through the national flood insurance program as our own Kerry Sanders has more on how Florida insurance companies are facing their own massive challenges they can't afford to stay in business anyone with a mortgage in a flood zone is required to carry Federal flood insurance but wind damage is covered by your homeowner's policy in Florida six insurance companies have claimed insolvency just this year homeowners complain those that are still in business here have jacked up premiums I'd say probably about a 30 increase for myself others I've seen them you know rise 50 percent 100 percent and some have just been canceled altogether Insurance Crisis in Florida the hardest hit counties in the storm's path experienced huge population booms in the last three decades joining us now to discuss Alex Harris climate change and hurricane reporter for the Miami Herald and our dear friend David Jolly a former Republican congressman from the state of Florida who is fortunately safe in Pennsylvania tonight Alex just how complicated is insurance in Florida right now is it that they are jacking their premiums or can they just not afford to stay in business given the amount of storms and damage that state faces yeah the insurance Market is really tough in Florida right now we have uh all of these companies going Belly Up and flipping their uh their clients over to Citizens our state friend insurer of Last Resort and that's stressing people out but also I mean these companies are forced to raise these rates because of things like fraudulent uh claims and assignment of benefit fraud there's a lot going on in the financial Market insurance right now and Florida isn't the only place struggling but up until this week one of the reasons we weren't struggling was that we hadn't had a storm and now we expect that to be a domino that really sets off some crisis over here and David you've been a How do you solve for this beneficiary the Florida real estate market has been hot hot hot you've got pretty LAX zoning laws there and things are built in all sorts of areas that maybe shouldn't be so how do you solve for this especially the insurance problem is it the state that you get involved these are private homes yeah it's a fascinating question Stephanie who Bears the risk of a homeowner's home ownership if you will and as Alex just mentioned the homeowners are home insurance industry in the State of Florida is really collapsing and without Federal intervention to Bear much of the loss of this storm we would further see the collapse of the homeowners insurance industry in Florida so what do you do who bears that risk the reality is in flood zones there is no private sector product to absorb the risk of a homeowner so the federal government has a national flood insurance program which in your earlier statement only 13 15 percent of of those in this in the strike zone had that that's because only 13 to 15 percent of mortgage companies required it for those those areas so do we subsidize the risk of them rebuilding that is the public policy question right should people actually be able to build in areas where we know we have had in the last five years three major hurricanes Michael Irma and now Ian should private home builders be able to build homes in those areas with the government subsidizing that risk that's a real policy question the one thing I would point out though Stephanie is when we ask questions about floods and hurricanes we also have to aggregate the risks of wildfires in the west of of ice in the Midwest of tornadoes and Tornado Alley how do we handle natural disaster risk is that truly going to be a private sector risk product or is the government going to play a role in that Communities hardest hit Alex let's talk about the communities that were hardest hit they were among the fastest growing in the state is that going to change after Ian think about all the people who moved to Florida in the last few years right Florida has seen an incredible population boom especially after the pandemic uh people really just wanted to come be in this state and Punta Gorda one of the places where the eyewall came ashore was one of the fastest growing cities in the country the last couple of years, so we've seen a massive influx which means there was a lot of people who've never experienced a storm maybe didn't realize the problems of going with the cheapest Insurance you could possibly get maybe didn't realize that they were outside a flood zone the importance of maybe just having flood insurance just in case something like this happened so we're expecting to see you know there's a lot of people that are going to be lining up asking for a lot of money from the federal government from their insurance companies from Charities there is going to be so many billions of dollars of damage here but I have no doubt like people will rebuild back here at Florida really has never learned not to build in places that are scary and dangerous and are going to get walloped year after year after year with storms we see it everywhere you mentioned Irma all those neighborhoods are full backup Mexico Beach where hurricane Michael came ashore a couple years ago all the way full again these communities people do not shy away from them after they're hit in fact they come back, and they build taller houses they build more they build more dents we are clustering our risk around the coast despite the risks of climate change and stronger storms well that is also Who doesn't evacuate because real estate development is one of the most lucrative businesses in this country that has the most in one of the most tax-friendly businesses that get hooked up by our tax code year after year David quickly before we go Florida also has one of the highest percentages of senior citizens people living with disabilities did Florida do a good enough job helping these vulnerable people in vulnerable communities evacuate they can't just hop in their cars and drive yeah listen Florida is very prepared for storms and I think the risk of life would be much greater if we did not have such an experienced infrastructure in the State of Florida uh for storms but I your question is a very good one because I got the question in the last 24 hours who doesn't leave who doesn't evacuate, and the reality is there are a lot of reasons but the most important one is those without means those without opportunity those without the communication that sometimes we take for granted municipalities make public shelters available but how do we make sure that people can get there the the economic disparity is a pressing question in moments like this and I think it's one that should be investigated coming out of Hurricane Ian leaving is a privilege we need to remember that mother nature hits the poorest communities the hardest Alex Harris thank you so much for your work really important reporting down there David Jolly I'm glad you and your family are safe [Music]
Video: Louisiana's Insurance Crisis: Homeowners' policy rates by ZIP Code (7:22)
The state senate is scheduled to talk about bringing homeowners insurance companies back to the state. This comes after a number of companies have either folded or left the state. The house passed two bills yesterday funding the ensure Louisiana incentive program. This program is designed to learn more insurers to the state, giving you more options and hopefully lower cost. The Senate finance committee approved the bills today. Last year many homeowners are dropped by their insurance companies or their premiums went through the group now as the legislature works on lowering homeowners insurance costs eyewitness investigator David Hammer got some exclusive data and found some very big differences and the insurance rates that homeowners pay depending on where they live yeah look for the QR code on your screen during David's story you can scan a photo of it with your mobile device that will pull up an interactive map where you can check out the rates in your zip code and compare them here's our David Hammer investigation not for sale we did a walk-in closet, and then we did darwinda cook was so proud when she finally became a homeowner in her mid-50s this was my dream she brought this house in New Orleans East when it was still damaged and rotting from Hurricane Katrina and turned it into this cozy loving home and that's your bedroom in this movie room but now three years into her dream her homeowners insurance company Americas has folded Cajun Underwriters took over the policy and Cook's insurance agent told her the premium would go from twenty-one hundred dollars to 6700 for the same level of coverage I can't even put into words how how devastating it was the agent found cook of 5300 premium by slashing her contents coverage, but that still takes her monthly mortgage payment from eight hundred dollars to more than fourteen hundred dollars now fourteen hundred dollar house no debt it's not looking good for me Louisiana had back to back devastating storm seasons in 2020 and 2021 to protect themselves from multiple disasters like that insurance companies actually buy insurance themselves it's called reinsurance and it's sold by big companies some with familiar names like Lloyd's of London, but now the cost of that reinsurance has skyrocketed some smaller insurers didn't buy enough reinsurance and went Belly Up others left the state a hundred thousand Louisiana homeowners couldn't get insurance from a private company last year they were forced to go instead to the state-run insurer of Last Resort Louisiana citizens seated premiums written 124 citizens asked Louisiana insurance commissioner Jim Donovan to approve an average rate increase Statewide of 63 percent, and he did because the rates are set by law at 10 percent higher than the highest private insurance rate in each parish and so it varies widely all across the state of Louisiana, and now we've uncovered evidence that the crisis is hitting homeowners in poorer areas even harder we got the premiums Louisiana citizens charged on 19 000 individual homeowner policies last year through a public records request we looked at only about half the policies the ones with two percent hurricane deductibles and twenty-five hundred dollar all perils deductibles and calculated the average premium paid in each zip code for every thousand dollars of insurance coverage purchased, and we found major variations across zip codes for example the average citizens policyholder in darwinda cook zip code 70127 paid 80 percent more for every thousand dollars of dwelling coverage in 2022 than someone in the Lakeview zip code 70124 where property values are significantly higher that makes no sense to cook, and I'm asking like what do you think do you know my address do you know what the darker Reds on the map are the zip codes paying 24 or more in premiums for every thousand dollars in dwelling coverage that's areas near the coast in wafush and Terrebonne parishes Eastern plaquemines parish and Shell Beach in Saint Bernard Parish but it's also New Orleans East and Kenner and the entire West Bank of Jefferson Parish 24 dollars per thousand of coverage really adds up at that rate of one hundred fifty thousand dollar house costs thirty six hundred dollars a year to insure with citizens and that's just the dwelling garages and other structures cost more now the yellows on the map are zip codes that paid less than 16 dollars per thousand on average last year including Lakeview Broadmoor and much of Uptown in downtown New Orleans and remember those are citizens rates for 2022 when citizens raised its rates 63 percent Statewide the average premium in Orleans Parish went up 82 percent meaning that 30 3 600 dollar policy will cost more than sixty five hundred when it renews in 2023. it's where New Orleans East has seen the most increases and that is more because due to open winds coming from two different ways to hit them Cook's insurance agent Stephen wavecchio shows how insurers use models to determine where the risks of storm damage are higher where unblocked winds could hit New Orleans East from the lake and the gulf for instance closer to the river we can get much better rate because the wind modeling is not as bad but Florida State University professor Charles nice says the details of the modeling process are kept secret it is a forward-looking statistical exercise in how frequent are storms how bad are they going to be how much damage and it's it's a simulation that runs thousands and thousands of times Well Vecchio also said insurance companies usually charge more for the first one hundred thousand dollars of dwelling coverage because that amount is usually enough to repair damage from storms fires and other disasters that means someone with a four or five hundred thousand dollar house pays a lower rate to cover most of their homes value than what cook pays for all 1 hundred fifty seven thousand dollars in dwelling coverage she has insurers are not allowed to consider race or income while setting rates but nice analyzed Florida data to see if the methods they use have an unintended discriminatory impact and the answer is yes we do find some statistical evidence it's yet another obstacle for cook by one this grandmother vows to overcome to keep her dream alive this is something that I want that I've always wanted, so I'm I'm not going to just you know let somebody come in and just sweep it away from me David Hammer Eyewitness News again you can check out David's story on wwltv.com and use the interactive map to see the insurance rates in your zip code and compare them with other areas of Louisiana tomorrow night at 10 in part two of not for sale David looks at how State leaders are trying to lower those rates and why some think they're missing the mark.