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Insurance crisis could hasten Louisiana’s young talent exodus

Woman holding her baby behind a fence
Cayla Zeek and 30,000 other former UPC policyholders in Louisiana have until the end of March to find new coverage for their homes. Photo by Travis Gauthier

When Natalie Briggs bought her first house in the summer of 2021, she made it a priority to keep costs low. Briggs, 32, hunted down a deal in Lafayette’s Saint Streets neighborhood and locked in a low interest rate, aiming to keep her monthly mortgage on par with her previous rent payments. 

But within a year of closing on her home, Briggs lost her homeowners insurance policy when Florida-based Weston Property & Casualty Insurance Company folded last summer, impacting more than 10,000 Louisiana policyholders.

Finding a new policy caused her premiums to double, from $1,100 to more than $2,200 a year, sticking her with a surprise bill of about $1,000 from her escrow account in December.

It’s a similar story for Cayla Zeek, a self-employed artist searching for a new policy to insure her home in the LaPlace neighborhood following the collapse of United Property & Casualty Insurance Company, also based in Florida, in recent weeks. 

UPC announced plans to withdraw from Louisiana in December, leaving its policies to expire on their existing schedules in 2023. But the company was placed into liquidation by the state of Florida Thursday, giving Zeek and 30,000 other UPC policyholders in Louisiana roughly until the end of March to find new coverage for their homes.

Zeek didn’t find out her UPC policy wouldn’t be renewed until an escrow issue over a previous premium increase caused her monthly mortgage payments to jump $100 last month. 

“I was definitely freaking out at first,” Zeek says. Spurred by that pressure, she hired a broker and set out to call companies herself for quotes. But her first call was a surprising let down. 

“The first one I called was Progressive, since that’s what I have my car insurance with,” she says. “They asked me like a million questions. I answered them all. And it’s not until I get to the end of this interview that they’re like, ‘Oh, we don’t cover in your zip code.’”

So far, Zeek has only landed a pair of quotes, one for $2,100 a year and the other for $3,100. 

“I know that’s probably relatively good, but I was like, ‘Oh, this is a jump from the $1,400 that I was paying.’ This is bumping up quite a bit.”

Tens of thousands of Louisiana homeowners have found themselves facing the same problem as 11 insurance companies folded, 11 more left the state and many others aren’t writing new policies in the wake of two devastating hurricane seasons in 2020 and 2021. 

The crisis is most clearly reflected in the increased reliance on Louisiana Citizens Property Insurance Corporation, Insurance Commissioner Jim Donelon said at a town hall in Lafayette in late February. 

Citizens is the state’s insurer of last resort, a quasi-government operation that offers policies to homeowners who cannot find insurance elsewhere and is required to charge at least 10% more than market rates. 

In 2022, Citizens took on 90,000 new homeowners policies across the state, more than tripling its user base and dramatically raising its costs for reinsurance, which helps companies pay claims after disasters. 

That led to a 63% hike in Citizens’ rates last year and, unless it can offload those policies in the near future, another major spike is coming that threatens to drive residents out of their homes, Donelon warned.

“If we don’t depopulate Citizens by 40,000 policies or more … it will go up another 40% or 50% for those 120,000 policyholders that are stuck [with] Citizens, and that’s unaffordable,” he said. “Literally thousands of people will turn in the keys to their house if that is what’s necessary. So it is truly a crisis.”

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Just as rising insurance costs have compounded with high interest rates to drive up the cost of homeownership in Lafayette and around the state, the crisis’ impact on the cost of living in Louisiana threatens to add to the state’s long-standing problem with depopulation, raising questions about the long-term resilience of its communities.

“This clearly connects back to big-picture, aggregate population dynamics for Louisiana,” says Dr. Stephen Barnes, director of the Kathleen Babineaux Blanco Public Policy Center at UL Lafayette. “We’ve talked for decades about the brain drain that Louisiana faces, and when you look over the course of decades, we see really limited population growth and pretty steady net out-migration.”

“Homeowners insurance, in some ways, is sort of a leading indicator for the broader questions about stability and sustainability of our coastal communities,” he adds. 

“I definitely had that pop into my head, like, ‘OK, I gotta get out of Louisiana,’” says Zeek. “I’m a visual artist, and that’s how I built my business. I have been able to find a way to do that here, but I do wrestle with bills going up like, ‘OK, I need to figure out how to grow my business.’”

Dr. Anna Osland, associate director of research at the Blanco Center, says the resilience needed for the state’s residents to weather natural disasters and the crises they produce is multifaceted and ranges from individual solutions to statewide efforts. 

“When we think about solutions, thinking about the scale of the problem and the scale of the solution is part of it, too,” she says. “So, ‘How are we developing strategies and plans that we can implement at a community level versus an individual level?’ But also knowing that individuals are part of the solution as well.”

“At a community scale, if homeowners can’t get insurance and can’t live here, then that becomes a business problem, because they don’t have a qualified workforce that they need. Or that means that we can’t recruit businesses to move here if they don’t think that their workforce can live here,” Osland adds. “So it becomes a huge community scale problem.”

To that end, Louisiana’s Legislature authorized a $45 million grant fund to entice insurance companies into the state to write as much as $180 million in new policy premiums over the next five years, which amounts to about 9% of state’s total premiums in 2021. 

That plan was funded at Donelon’s insistence in February, though it was criticized as an insufficient “Band-Aid” by leaders at the statehouse. 

Donelon is also pushing the Legislature to fund a grant program to help homeowners pay for upgrades that would bring their houses up to the Insurance Institute for Business & Home Safety’s Fortified Home Standards and to require companies to give premium discounts to homeowners who make those improvements. 

Similar programs were put in place after hurricanes Katrina and Rita to incentivise homeowners to bring their houses in line with the state’s building codes and to help lower premiums for those who did. 

Those programs could be a good opportunity to make it easier for homeowners to improve their houses and lower their insurance costs, says Zeek, who has undertaken several upgrades to her home in the six years she’s been there. 

“I would think that would be a good idea, especially if it would help prepare the house and lower the cost of insurance if they’re like, ‘Oh, you have these things? We’ll give you a lower rate because you’re more equipped,’” she says. 

But even with help from the state, upgrades to a home’s resilience can still be prohibitive because of their cost and their disruption to daily life, says Briggs, leaving the state with an incomplete solution that may not work for all of its residents. 

“I’m a single-income household. I bought a house that was pretty sturdy, that hopefully wasn’t going to need a lot of work anytime soon,” Briggs says. “So, to tell me the solution to my insurance crisis is to spend money on my home, when I purchased a home that I was not planning on spending a ton of money on right away, is not a solution.”