State Farm Denied Rate Hike in Louisiana; Citizens Gets 6.5% Increase

Louisiana insurance regulators rejected a rate increase from the state’s largest insurer of homes, but the board of the state’s property insurer of last resort approved a rate hike, albeit smaller than the one originally requested.

State Farm Fire and Casualty Co., with approximately 27 percent share of the homeowners market in Louisiana, wanted an average 14.3 percent rate hike for its 301,000 residential policyholders. Insurance Commissioner James Donelon rejected the increase.

The filing would have boosted average homeowner rates by 14.4 percent. Unit owners of condominiums would have paid an average of 18.6 percent more, while renters’ insurance would have jumped 8.3 percent.

State Farm said the entire increase would have increased Louisiana rates by just a little more than $55 million annually.

“This is a significant increase on the back of two years of increases,” Donelon said.

State Farm received a 9.9 percent increase last year after requesting 19.1 percent. In 2009, the insurer received an 8.3 percent hike after requesting 13.7 percent.

Louisiana Citizens Property Insurance Corp., meanwhile, will raise rates for its 119,000 homeowners’ policies by an average of 6.5 percent, effective July 1.

Citizens CEO Richard Robertson said, on average, a homeowner will pay an additional $127 per year, bringing the average policy to about $1,730 annually. He said the increase would bring in about $15 million annually from Citizens’ 119,000 homeowner policies.

The board had asked for an average 9 percent increase, but Donelon reduced it. He said the department does not think Citizens should be accumulating capital and reserves as a private insurance company does.

Donelon said that if Citizens has an overwhelming number of claims from storms, private insurers can be assessed to provide money. The assessments are added to policies, and policyholders can file for a state income tax credit for the amount.

Citizens rates are required to be 10 percent higher than average private insurance rates.

The rate increase would not be uniform across Citizens’ territory. Robertson said the rate hike generally will amount to about 7 percent for parishes below the Intracoastal Waterway and 1.5 percent for parishes above the waterway. About 113,000 policyholders will see rate changes — either up or, in some cases down, he said. The remainder will see little, if any change.