Key Louisiana lawmakers plan to challenge property insurers by trying to limit the special deductibles they can impose when homes are damaged by tropical storms and hurricanes.
The so-called “named-storm” deductibles, of up to 5 percent, are the norm in hurricane-prone states from Texas to New England. For Louisiana, the named-storm deductible kicks in when a hurricane or tropical storm enters the Gulf of Mexico.
Some policyholders were unaware they had a storm deductible and could not rely on their insurer to pay, for instance, up to $10,000 for repairs on a $200,000 home with a 5 percent storm deductible.
Some homeowners’ unpleasant surprise was doubled this year, for those who had wind damage from both Hurricane Gustav and Hurricane Ike.
“It’s just human nature: People buy their insurance, they don’t get into all the nitty-gritty details until they have a claim, then they’re shocked and dismayed,” said Jeff Albright, head of the Independent Insurance Agents and Brokers of Louisiana.
To shield homeowners, state Insurance Commissioner Jim Donelon is backing a plan to prevent insurance firms from imposing more than one storm deductible per year.
The idea stems from a law passed by Florida lawmakers in 2004, when that state was raked by four hurricanes and some homeowners were forced to use their own money for repairs multiple times, because insurers imposed named-storm deductibles after each storm. The Florida law means insurers can now only impose one storm deductible per hurricane season.
Donelon won assurances from two key Louisiana lawmakers that they’ll co-sponsor similar legislation next year: Rep. Chuck Kleckley, R-Lake Charles, chair of the House Insurance Committee; and Sen. Don Cravins Jr., D-Opelousas, chair of the Senate’s insurance panel. Donelon would need to find a new Senate backer if Cravins succeeds in his run for Congress against U.S. Rep. Charles Boustany, R-Lafayette.
Albright said independent agents also support the idea.
“We don’t think it’s going to cause any great market disruption,” Albright said. “This idea makes sense because, for a very small number of people, it can be personally catastrophic if you get hit twice” by hurricanes in one hurricane season.
Albright said the odds are low that Louisiana will be hit by more than one storm in a year – even though that’s happened twice in recent memory: Katrina and Rita in 2005, and Gustav and Ike in 2008.
The insurance industry disputes Albright’s point. Bob Hartwig, president of the Insurance Information Institute, a New York-based industry group, said the costs could add up dramatically for a firm insuring hundreds or thousands of homes.
“The odds are low for any given homeowner, but in any given hurricane season, there could be thousands of people unfortunate enough to be struck by a hurricane twice,” Hartwig said.
The industry’s cost would simply be passed on to policyholders, he said.
Donelon agreed that policyholders would likely see a rate increase of about 1 percent or 2 percent if such a law passed.
“That, in my judgment, is worth the peace of mind that folks would get during hurricane season,” Donelon said.
On the Net:
Louisiana Department of Insurance: www.ldi.state.la.us/
Topics Catastrophe Legislation Windstorm Louisiana Hurricane Homeowners
Was this article valuable?
Here are more articles you may enjoy.
AIG Files Amended Suit Against Former Execs, Dellwood Insurance 
With American Mobile Cancellations, Florida Mobile Home Market Has ‘Fallen Apart’ 
Man Admits to Tracking Drivers, Programming Keys, Stealing and Reselling Vehicles 
Study Urges Rethinking of Disaster Management in Era of Compounding Events 
