NEW ORLEANS — Darlinda Cook fulfilled a dream three years ago when, in her mid-50s, she finally became a homeowner, buying a damaged, rotting house in New Orleans East and turning it into a cozy, loving home.
But now, she’s one of thousands of Louisiana homeowners being dragged to the financial brink by Louisiana’s spiraling insurance crisis. She just saw her monthly note rise from $800 to more than $1,400, all because of her homeowner’s insurance premium, and she’s left wondering if chasing her dream was a mistake.
“Even if my insurance would have went up just a little, I would have been able to understand that. But to go up at such an extreme, that was just too much,” she said, tears welling up. “A $1,400 house note? It’s not looking good for me.”
It’s also hard for Cook to understand why the area of New Orleans East where she lives has higher insurance costs than other sections of Orleans Parish. A WWL-TV analysis of rates charged by Louisiana Citizens Property Insurance Corp. found that people in her ZIP code, 70127, pay among the highest premiums in the state for every $1,000 of coverage.
In fact, WWL-TV analyzed homeowners’ policy data from Citizens, the state’s insurer of last resort, and found that people in Cook’s section of New Orleans East paid rates in 2022 that were as high or higher than those in coastal ZIP codes, where the risk of storm damage is more obvious. So did people in ZIP codes in Kenner and the entire west bank of Jefferson Parish.
The analysis also showed that Citizens’ rates, although set based on the highest rates charged by private insurers in each parish, varied significantly within Orleans Parish. In Cook’s ZIP code, 70127 the average cost of every $1,000 of dwelling coverage from Citizens, with a 2% hurricane deductible, was $24.76.
That means Citizens would have charged a $150,000 house in ZIP code 70127 an average of $3,714 for dwelling coverage, prior to any credits for mitigation measures or additional charges for garages, other structures or perils.
Orleans Parish is facing an 82% increase, on average, in Citizens homeowners’ insurance premiums for 2023. So, that same $3,714 premium could easily exceed $6,700 if it’s renewed this year.
When Americas Insurance folded last year, another regional firm, Cajun Underwriters, took over Cook’s policy. Cajun raised her premium from $2,100 in 2022 to $6,700 for the same level of coverage starting this month.
Her insurance agent, Stephen Lovecchio, scrambled to find coverage she could afford ahead of her policy renewal date this week. It meant dropping most of her contents coverage, but Lovecchio got Cook a policy with Cajun for $5,270.
The average Citizens rate in 70127 last year was 80% higher than it charged in 70124, the Lakeview ZIP code, where homes often exceed $500,000 in value. The rates Citizens charged in Lakeview and other sections of New Orleans nearer the Mississippi River, including Broadmoor, Uptown and the CBD and French Quarter, were all less than $16 per $1,000 of dwelling coverage.
Insurance experts said there were several reasons why premiums would be more expensive for the same amount of coverage in certain areas within a parish, particularly areas with lower home values.
A key factor is the way insurance companies charge more for the first $100,000 in coverage than for the next $50,000 and the next, and so on. Cook’s insurance agent, Stephen Lovecchio, said they do that because $100,000 is usually enough to repair damage from storms, fires, or other disasters, while only the most destructive catastrophes would lead to claims for a home’s full replacement value.
In other words, someone with a $500,000 house may pay a similar rate for the first $150,000 in coverage as Cook pays for the $157,000 in dwelling coverage she purchased this month. But the owner of the $500,000 house would pay less for every dollar insured above that, thus lowering the average rate paid on the entire policy.
In all, about 100,000 Louisiana property insurance customers lost their private coverage and were forced to buy policies from Citizens. By law, Citizens’ rates are set at 10% higher than the highest rate charged by private insurers in each parish. Because of the large premium increases charged by private firms, Louisiana Insurance Commissioner Jim Donelon had no choice but to approve a 63% average statewide increase for Citizens’ 2023 premiums.
Those increases vary significantly by parish, depending on the private market rates in each parish. In Orleans Parish the rate hike is an average of 82%. In St. John the Baptist, hard hit by Hurricane Ida, it’s 111%. Jefferson Parish will see only a 34% increase, but the average homeowner’s premium there in 2022 was already significantly higher than it was in Orleans, according to market data reported by Citizens to the Louisiana Department of Insurance.
WWL-TV analyzed more than 9,700 Citizens homeowner policies with the same deductibles and mapped the average premium per $1,000 of dwelling coverage by ZIP code. That showed higher rates in Jefferson Parish in 2022, with Kenner and the entire west bank paying an average of at least $26 for every $1,000 of dwelling coverage, similar to what Cook is being charged in New Orleans East.
Lovecchio said insurers use catastrophe models to determine where the risks of storm damage are higher. For instance, he said the risks are higher in New Orleans East than other parts of the city because unblocked winds can hit the area from Lake Pontchartrain to the north and from the Gulf to the east and southeast. He said areas closer to the river get better rates because the wind modeling there is not as risky.
But Florida State University Professor Charles Nyce says the details of the modeling process are kept secret and not easily understood – “a black box,” he said.
“It is a forward-looking statistical exercise in how frequent are storms, how bad are they going to be, how much damage? And it's a simulation that runs thousands and thousands of times,” Nyce said.
Florida has a state commission that reviews and certifies the models insurers use. Louisiana does not and relies on the Florida commission’s rulings, Nyce said.
Insurers are not allowed to consider race or income while setting rates. But Nyce analyzed Florida data to see if the methods they use could have an unintended discriminatory impact on minority and lower-income communities.
“And the answer is yes. We do find some statistical evidence,” he said.
It’s just another obstacle for Cook. She said she works hard for a local engineering firm, but even though she’s nearing 60, she’s seriously considering taking a second job if it helps her afford the insurance hike.
“This is something that I want, that I've always wanted,” she said. “So, I'm not going to just let somebody come in and just sweep it away from me.”
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