Louisiana homeowners insurance rates third highest nationwide

Louisiana has the third-highest homeowners insurance premiums in the nation, according to the first assessment of prices after Hurricane Katrina by the National Association of Insurance Commissioners.

The average homeowners insurance premium in Louisiana was $1,257 in 2006, an increase of 9.9 percent from the previous year and the third biggest increase in the nation. But Louisiana Insurance Commissioner Jim Donelon said that the 2006 figures don't reflect the wave of price increases after Katrina, because bills in 2006 would have been based on rates that were approved in 2005, before Hurricanes Katrina and Rita walloped the state.

Next year will be the first time that the annual NAIC study reflects true post-Katrina prices, and Donelon believes those figures from 2007 will show a 12.5 annual increase. The increases in 2008 and 2009 will be much smaller and will likely improve Louisiana's position relative to other states. "We will see improvement, I believe," he said. The most expensive property insurance market in the country in 2006 was Texas, where premiums increased 2.7 percent in 2006 to an average of $1,409 per home. But the NAIC cautions against comparing Texas to any other market because the Texas data comes from a different source than most other states, and the homeowners policies are slightly different.

The number two spot went to Florida, according to the NAIC, where premiums increased 28 percent in 2006 to an average of $1,386 per home. The NAIC says that actual premiums are probably higher because the figures exclude policies from Florida Citizens Property Insurance Corp., which became the state's largest insurer in 2006 and charges prices at the top of the market.

In Louisiana, many people were probably paying more than $1,257 for coverage in 2006, because the NAIC figure does not include the cost of flood insurance or a standalone wind-policy from Louisiana Citizens Property Insurance Corp. if a private homeowners policy dropped wind coverage.

The high cost of insurance in Louisiana is remarkable because it's a poor and rural state without fancy coastal vacation property and large expensive homes. The NAIC says that average premiums vary by rates, the cost of real estate, price of rebuilding, type of construction and location.

Other states that saw big jumps in insurance premiums were states in the Northeast with expensive coastal property such as Massachusetts, in the number two slot at 11.9 percent, and Rhode Island, which saw a year-over-year jump of 8.2 percent.

Bob Hunter, director of insurance at the Consumer Federation of America, said people in coastal areas are paying lots of money for insurance because insurers pad the premiums to protect themselves in case hurricane risk models are wrong. "There's a huge fear factor that the insurance companies build in. They call it a risk factor," Hunter said. "It's basically what the market will bear. By the same token, if more people build homes out of harm's way and with materials that stand up to hurricanes, premiums should go down.