The proposed rate change is an overall average increase of 4.8 percent, expected to be implemented June 1. LCPIC is required by law to charge rates that are at least 10 percent above the voluntary market rates.
According to LCPIC CEO Richard Newberry, the market analysis rate was arrived at by surveying 120 companies for premium and policy count by parish for five different products: dwelling, homeowners, renters/condo, mobile home, and wind-only.
The surveyed data is aggregated by product and parish to determine which companies qualify for market rate comparison. Only the rates for admitted companies that qualified were considered in the rate-making calculation. The highest rate of the qualifying companies becomes the “market rate.” A company qualifies when policy counts have increased by 25 or its premium makes up two percent of the market.
The residual property writer uses its own historical non-storm losses, along with modeled storm losses, loss adjustment expenses, reinsurance expenses and operational expenses to calculate an actuarially sound rate by parish and product.
LCPIC then compares the actuarial review rates with the market comparison, takes the larger of the two and adds 10 percent to arrive at the rate to charge for LCPIC’s personal lines policies.
In breaking out the 4.8 percent proposed overall average rate increase, the FAIR Plan indication is a 5.1 percent rate increase and affects about 92 percent of LCPIC’s personal lines premium, or approximately 35,000 policies. The Coastal Plan rate indication is an overall average 2.2 percent rate increase and affects about nine percent of the residual market insurer’s personal lines premium, or approximately 3,000 policies.
By category, the proposed overall rate change for homeowners is a decrease of 3.9 percent; dwelling fire will increase 2.0 percent; renter/condominium unit owners will increase 2.2 percent; mobile home coverage will decrease 4.3 percent, and wind-only rates will increase 15.8 percent, according to documents provided by LCPIC.
The proposed rate changes differ between the two plans. In the FAIR Plan, the residual property insurer proposes to decrease homeowners rates by an overall average 4.2 percent; increase dwelling fire rates by 2.1 percent; increase renter/condominium unit owners by 2.0 percent; decrease mobile home rates by 5.6 percent, and increase wind-only rates by 16.1 percent.
In the Coastal Plan, LCPIC proposes an overall average rate increase for homeowners of 11.6 percent; increase dwelling fire by 1.1 percent; increase renter/condominium owner rates by 9.4 percent; increase mobile home rates by 0.9 percent, and wind-only rates overall will increase by 8.7 percent.
Policyholders in Orleans Parish will pay less for their personal lines homeowners insurance in the FAIR Plan. According to LCPIC, the proposed rate change in Orleans will be a 4.4 percent decrease on $2,164,604 in premium. According to the report to the board, the rate change is actuarially driven.
For other LCPIC homeowners policyholders in the FAIR Plan, the premium changes for the parishes in the top five largest parishes by premium volume are: Jefferson will not see a market analysis driven rate increase or decrease on $574,828 in premium; St. Tammany will see an actuarial rate increase of 5.1 percent on $263,751 in premium; East Baton Rouge will see a market driven rate increase of 1.7 percent on $237,113 in premium, and Terrebonne will see a market driven rate decrease of 16.9 percent on $206,738 in premium.
For dwelling policyholders in the FAIR Plan, the premium changes for the five largest parishes by premium volume are: Orleans with an actuarially driven rate increase of 3.1 percent on $8,321,274 in premium; Jefferson with a market analysis driven rate will see a rate decrease of 2.8 percent on $5,542,530 in premium; Calcasieu with an actuarially driven rate increase of 1.8 percent on $1,206,324 in premium; Lafayette with a market analysis driven rate increase of 13.8 percent on $1,168,057 in premium, and Terrebonne with an actuarial driven rate decrease of 14.3 percent on $1,117,530 in premium.
The parish that will have the largest premium change for dwelling policyholders in the FAIR Plan and have more than $100,000 in premium is St. Martin, and according to LCPIC, the increase is an actuarially driven rate increase of 15.3 percent on $868,214 in premium.
The parishes that have more than $200,000 in premium volume in mobile home coverage in the FAIR Plan are Vermillion, Lafayette and Calcasieu. Mobile home policies in Vermilion will see a market analysis driven 10.5 percent rate decrease on $246,291 in premium, Lafayette will see a market analysis driven 0.6 percent rate increase on $228,252 in premium, and Calcasieu will see a market analysis driven 0.9 percent rate increase on $219,506 in premium.
For wind-only policyholders in the FAIR Plan, the premium changes for the five largest parishes by premium volume are: Jefferson with an actuarially driven rate increase of 14.5 percent on $4,700,321 in premium; Orleans with an actuarially driven rate increase of 22.3 percent on $2,960,581 in premium; St. Tammany with an actuarially driven rate increase of 13.9 percent on $1,125,609 in premium; Vermillion with an actuarially driven rate increase of 13.9 percent on $596,233 in premium, and Lafayette with an actuarially driven rate increase of 10.8 percent on $533,290 in premium.
East Baton Rouge will have the largest rate increase, an actuarially driven rate increase of 22.5 percent on $167,431 in premium.
The board voted unanimously to implement the new rates if the department approves rates that are within 0.5 percent of the proposed rates, up or down.
Newberry presented the new Homeowner Renovation Policy to the board. “This product was developed to help the citizens of Louisiana who sustained storm damage to their personal homes,” Newberry told the board.
The Homeowner Renovation Policy will be a basic form with personal liability limits of $100,000 or $300,000 that are available to allow the insured to maintain requirements for an umbrella policy if needed; primary residence only, one to four families; the annual policy does not renew automatically, but one additional year is available if requested prior to the active policy’s expiration date; the structure can have existing hurricane damage but must have either a building permit or a signed Louisiana licensed contractor’s contract; Coverage A must not exceed $1,000,000; minimum AOP deductible of $2,500 and a two percent FAIR Plan or five percent Coastal Plan hurricane deductible is required, and the dwelling must be insured to 100 percent of the replacement cost of the structure.
LCPIC’s Agents’ Advisory Council provided input on the Homeowner Renovation Policy to LCPIC’s management.
Newberry told the board that LCPIC had received a verbal approval from the Louisiana Department of Insurance, and the new policy became available at the end of January.
The board voted unanimously to approve the Homeowner Renovation Policy with the provision that the availability of the new policy sunsets in two years.
In Newberry’s report to the board, he updated board members on the 2021 and 2020 storm seasons. The storms that Newberry reported on were hurricanes Ida, Laura, Delta and Zeta.
The claims data reported to the board were as of Dec. 28, 2021, and are as follows: Ida, 13,843 claims reported with 14,600 expected total claims, with 13,164 inspected, 12,907 closed, and three claims in litigation; Laura, 2,707 total claims, with 2,635 inspected, 2,507 closed, and 106 in litigation; Delta, 2,127 total claims, with 2,072 inspected, 2,006 closed, and 75 in litigation, and Zeta, 2,644 total claims, with 2,541 inspected, 2,598 closed, and seven claims in litigation.
LCPIC’s Vice President of Accounting and Finance Joe Sciortino reported to the board that on Nov. 30, LCPIC had $61.1 million in operating cash and $71.4 million in investments, for a total of $132.5 million in cash and investments, compared to the beginning of 2021 when LCPIC had $100.7 million in operating cash and $77.4 million in investments, for a total of $178.1 million in cash and investments.
When the December numbers are included, Sciortino expects to end 2021 with $69.0 million in operating cash and $75.8 million in investments for a total of $144.8 million in cash and investments.
Sciortino also reported that LCPIC’s policyholder surplus at the end of November was $136.1 million compared to $161.9 million at the beginning of 2021.
Additionally, he reported that LCPIC’s net income at the end of November was a net loss of $27.5 million, $29.0 million less than the expected income of almost $1.5 million that was budgeted for the end of November. The loss was driven by the almost $29.0 million net underwriting loss for the year.