Insurance companies may resume canceling policies after Hurricane Ida. Here is what it means | State policy
Starting Monday, insurers can resume the process of canceling or non-renewing coverage for policyholders in Southeast Louisiana after the state’s primary insurance regulator chooses not to. extend the emergency protections issued before Hurricane Ida.
On August 26, Insurance Commissioner Jim Donelon invoked Emergency Rule 47, prohibiting insurers from interrupting or abandoning coverage, even for non-payment of premiums, for policyholders in the 25 parishes on the Ida’s path. The order was extended once but expired on Sunday October 24th.
By allowing protections to end, Donelon argued that the order places a financial burden on state insurers, who are under “significant stress” as they face more than $ 20 billion in insured losses. and hundreds of thousands of complaints.
The insurance department is in contact with “several” insurers who are facing “solvency issues” as a result of Ida’s destruction, Donelon said. He wouldn’t say which insurers that included.
But last week, as Donelon considered whether or not to pursue an extension of policyholder coverage, he received disturbing news: an insurer was completely withdrawing from the Louisiana market.
That company, GeoVera, controls 1.63% of the Louisiana home insurance market and operates as an excess carrier, covering the type of high-risk properties that standard insurers don’t cover. The carrier is also leaving South Carolina, according to Donelon.
“Let them come in, because of their losses to Ida, and say, ‘We’re getting out of here. We are getting out of state, ”that’s not a good sign,” Donelon said. “This is a significant indication of real concern on the part of businesses for Louisiana.”
Donelon described GeoVera and other surplus lines, such as Lloyd’s of London, as the “cowboys of the insurance industry.” Freed from rate and standard form regulations, they rush into markets others fear to venture into, with coverage typically more expensive than regular insurance.
Just six months ago, Donelon said GeoVera assured him they were here to stay and that they would “aggressively write into the teeth of the receding coastal market” in southwest Louisiana. That was before Ida blasted her catastrophic path through Southeast Louisiana with its fast racing car winds.
There are enough insurers left in Louisiana to absorb GeoVera’s policyholders, Donelon said, but the company’s decision to pull out has prevented him from asking legislative insurance committees for permission to extend Rule 47. an additional 30 days.
Louisiana’s independent insurance agents and brokers have asked Donelon to keep coverage on a limited basis, reducing it to cover those who have suffered property damage, said Jeff Albright, CEO of the organization.
But Donelon refused, arguing that emergency protections amounted to “free insurance” for policyholders.
In fact, in most cases, policyholders who have not had a claim after Ida now have the possibility of changing insurer without paying their premiums during this 60-day period. Insurers can sue for these payments, but Donelon said they rarely do so.
Cancellations will not happen overnight. By law, notices must be sent to policyholders. And carriers that were in the middle of a non-renewal process when Ida hit will have to start the notification process all over again, Donelon said.
Additionally, unlike other states, insurers in Louisiana are “married” to policyholders after three years in business. Louisiana’s one-of-a-kind law protects the insured against cancellation or non-renewal of coverage, with the exception of properties that are the subject of two or more “act of God” claims over the course of a period of time. ” a three-year coverage period.
Still, Donelon expects premiums to rise 10-12% next year. And insurers looking to reduce their exposure will likely increase the deductibles they charge during hurricane season in order to drive out policyholders.
The market fluctuations come as thousands of people in Southeast Louisiana begin the long and arduous process of bargaining with their insurance companies over damage reimbursement. Donelon said that according to conversations he has had with insurance agents, a third of all claims arising from Hurricane Ida have been closed.
“It bothers me a lot to hear that thousands of people have communication issues, slow adjustment issues, slow pay issues, but we are now filing consumer complaints against companies,” said Donelon.
With frustration mounting, state lawmakers are already considering consumer protection proposals for possible introduction in next year’s legislative session. However, as is often the case with the establishment of insurance regulation in Baton Rouge, fears of scaring insurers and pushing up prices often trump reforms.
“It’s still a very difficult line to go. First and foremost, I am here to protect consumers, ”Donelon said. “A big part of this is monitoring the creditworthiness of the companies they buy insurance from… After that, the next thing I need to do is make sure the insurance is affordable and available to consumers. “