Friday, 23 August 2013 10:50
Insurance storm brews in Louisiana called Citizens
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Isaac-monday1pmIn the movie Guys and Dolls, gambler Nathan Detroit (played by Frank Sinatra) says:  “How can it get any worse.  What more can you do to me?”  That’s what thousands of Louisiana property owners are saying about the state’s insurance climate for insuring their homes and businesses. 


The cost of property insurance is skyrocketing and rates have become unaffordable.  And if a property owner is able to scrape up the spiraling yearly premiums, their claims are often not being paid.  People are moving out of Louisiana and fewer potential home and business owners are moving in. Outrageous insurance costs are one of the major reasons that growth is at a standstill.

I wrote about how projections of increasing premiums could, in some parts of the state, exceed 1000% in this column last week.  The national flood insurance program was re-authorized last year by congress and was given the authority to reduce subsidies to coastal states like Louisiana.  Apparently, coastal state members of congress failed to read the legislation, voted for it, and are now hollering for delays.

But that’s just one part of the problem.  Louisiana has the dubious distinction, year after year, of having the highest property insurance rates in the country.  Homeowners in the state pay an average of more than $1600.00 to insure a home, with much steeper rates throughout south Louisiana.  And the bugaboo that has caused so much damage to the state’s insurance climate is Citizens Property Insurance Company.  A Baton Rouge Business Report front-page headline called Citizens the “worst financial disaster in the last 100 years.”  Louisiana State Treasurer John Kennedy has echoed that view repeatedly and has called on the legislature to abolish it.

The contrarian view was recently offered by Insurance Department officials who, in a letter to the legislature, called the company “a model on the national stage.”  And they are right if you are searching for an example of dysfunction and incompetence.  Respected columnist James Gill, who has written for the state’s largest two newspapers, concluded, “the entire citizens insurance set up is straight out of Alice in Wonderland,” and warned property owners to “brace ourselves for disaster.”  Gill also pointed out that Citizens will pay out well over $100 million for delays in paying claims, and concluded that the Citizens board “seems determined to make plaintiff lawyers as rich as possible.”  Understandably, the Insurance Department did not share Gill’s opinion with Louisiana lawmakers.

A series of lawsuits going back to hurricane Katrina in 2005 are still hanging over Citizens’ head.  And new litigation claims are filed weekly.  With the deadline for the one-year prescription date of August 29th following Hurricane Isaac fast approaching, look for a flurry of suits to be filed within the next two weeks.  Last week, a Metairie homeowner sued Citizens for failing to cover some $73,000 in proven damages plus 50% in penalties following Hurricane Isaac.  Expect more suits to come.

The few defenders of the Citizens’ fiasco point out that Louisiana lies in hurricane alley, and that this exposure makes it necessary to set property rates higher than the rest of the country.  That would make sense if Louisiana were the only state facing hurricane threats.  But hurricanes have wreaked havoc on numerous states along the Gulf and East coasts.

Damage estimates, following Hurricane Sandy that hit the east coast last year, continue to grow and are approaching the $40 billion in insurance losses from Hurricane Katrina that devastated the Gulf coast back in 2005.  Florida, Texas and the entire Gulf coast face continuing threats, yet property owners in surrounding southern states pay significantly less than property owners in Louisiana.

So what should responsible legislators and insurance officials do to make a dent in the rising costs of property insurance in the Bayou State?  First, abolish Citizens.  It’s been a disaster from day one. And if it’s such a good idea as its defenders say, then why hasn’t any other state adopted the Louisiana approach? I have received calls from a number of other states seeking my opinion of the Citizens concept.  My answer?  Take a look but keep your guard up.  No other state even gave the idea a second look.

Florida has a similar state run company. But to back up all insurance companies operating in the state from a major disaster, they have created the Florida Hurricane Catastrophe Fund.  The state has the largest exposure to hurricanes, by far, with 85% of its population living in close proximity to the coast.  The Florida fund recently reported that it’s in the best financial shape since it was created in 1993. A major Florida homeowner insurance company recently announced a 19% rate reduction.

Coastal states from Texas across the south and up the east coast all have nonprofit, state-supervised property agencies run by insurance companies operating in each state.  This system is similar to the plan that was in place before the Louisiana Legislature caused so much havoc by forming Citizens.  To make a comparison, the Texas plan is solvent and has money in the bank.  The Louisiana Citizens concept has a current debt of over $1 billion, and has just asked the state for permission to borrow another $100 million.  So the old plan has been working fine in a number of other states that have substantial funds held in reserve.  In Louisiana, the plan is dead broke.  It makes you wonder — just who has this figured out right?

There are a number of ways to bring much more affordable insurance to Louisiana homeowners.  Other states have applied the old adage: “where there’s a will, there’s a way.”  For Louisiana state officials who could make a big difference in making insurance more affordable, it has become “we got lost along the way.”


“It’s not hurricanes that are causing high insurance rates, but bad public policy.”

Policy Analyst Michelle Minton

Peace and Justice

Jim Brown

Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide.  You can read all his past columns and see continuing updates at  You can also hear Jim’s nationally syndicated radio show each Sunday morning from 9 am till 11:00 am, central time, on the Genesis Radio Network, with a live stream at

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Jim Brown

Jim Brown is a Louisiana legislator, Secretary of State and Insurance Commissioner.  

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