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Getting new homeowners or business property coverage is putting the brakes on the
recovery of New Orleans. This is a "hidden devaluation" of properties
in the area.
Many of the insurance companies are no longer writing new homeowners policies in New Orleans. Rental property insurance is skyrocketing with rates up 300% in some cases. Businesses report deductibles raised 1000% while rates increase by seven times.
A possible approach that could help Louisiana would be the development of a federal catastrophe fund that would
essentially function as reinsurance in the largest disasters. This is something the 110th Congress may entertain.
Traveler's Insurance in January 2007 reversed their decision to leave the area. Travler's is a major business insurer in New Orleans with as much as 33% of the area's commercial insurance. It's not totally rosy as Traveler's intends to drop many policies at renewal based on the loss history and they are continuing their moritorium on new homeowners policies.
Another positive development in 2007 involved State Farm. Since the storm State Farm has been unwilling to write any new homeowners policies in New Orleans. In August 2007 they announced that they would begin to allow transfers for existing customers across southeastern Louisiana.
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Citizens Insurance Plan
: The state of Louisiana offers an insurance plan of last resort to homeowners who can't get insurance from regular commercial sources. Guaranteed by the state the citizens plan perfromed poorly in claims processing after the storm and required a bailout by the state when they found themselves $1.5 billion in the hole financially.
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National Catastrophic Coverage
: Some insurance regulators are floating the idea of nationally subsidized catastophe protection. Modelled after the post-911 terrorism coverage offered by the US such coverage would theoretically induce more insurers to enter the market.
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Insurance companies may seem like "fat cats" to many and they've
created some new enemies as they've been overwhelmed by destruction.
Destroying their business in our area will only serve to make things
worse.
New Orleans needs a pro-business climate. This means good for tourism,
good for oil and gas, good for health care, good for utilities, even
good for insurance companies.
The Corps of Engineers admitted the levees broke because of design
flaws. Furthermore they admitted they knew about the flaws and they
didn't fix them. The insurance companies, just like the citizens, were
damaged because of this negligence. They will raise their rates, refuse
to write new policies, reduce their coverage and just leave the market
if we refuse to acknowledge their damages and the potential that it
could happen again.
Why should a private company be asked to shoulder
the burden of a public agency's failure? Why should the public pay
higher rates? The insurance problem is a lingering result of the Corps
failures in New Orleans.
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