Last Modified: Wednesday, July 09, 2014 12:38 PM
BATON ROUGE — One month into the hurricane season, State Farm's 308,000 Louisiana homeowner's customers are confronting an unpleasant change: their policies now include a mandatory 5 percent hurricane deductible.
State Farm spokesman Gary Stephenson tells The Advocate he hurricane deductible was included on new policies in November and added to existing customers as they've renewed their policies on or after Dec. 1. Most policies had a 2 percent hurricane deductible.
That means a customer with a $200,000 house and 5 percent hurricane deductible will pay for the first $10,000 in damage before insurance kicks in, compared to the $4,000 the customer would have paid under a 2 percent deductible.
The mandatory hurricane deductible accompanied an average statewide rate increase of close to 9 percent on premiums policyholders pay for insurance. The increase averages 9 percent in Orleans and Jefferson parishes, 7.5 percent in East Baton Rouge, and 9.4 percent in Lafayette, according to the Louisiana Department of Insurance.
The increased hurricane deductible wasn't part of State Farm's previously reported rate filing nor was it required to be.
"They (State Farm) can implement the deductible change as long as they apply it to all policyholders, and it's done statewide," said Insurance Department spokeswoman Ileana Ledet. The company doesn't need the Insurance Department's approval.
"Going to the 5 percent hurricane deductible is one step we are taking to help hold down premium rates as much as possible," Stephenson said.
State Farm paid billions to its Louisiana customers for Hurricane Katrina claims and many millions more to cover policyholders' damages from hurricanes Rita, Gustav, Humberto and Ike. But that is why State Farm exists, he said, to take care of customers.
Robert Hunter, insurance director for the Consumer Federation of America, said the 5 percent hurricane deductible has a big impact on rates.
The hurricane deductible makes State Farm's average rate increase more like 15 percent or 20 percent, Hunter said.
Stephenson said without the storm deductible, the rate increase on premiums would have been higher than 9 percent, but he did not know how much greater.
State Farm is the state's largest insurer with roughly 30 percent of the homeowner's market.
Posted By: E.M. On: 7/17/2014
Title: Ten Worst Insurance Companies
For the person in the comments who stated he was happy he switched to Allstate, you should read this interesting report.
Posted By: biff On: 7/11/2014
Title: uh huh
State Insurance Commissioner Jim Donelon did NOT get his name included in this article, because it is about increasing rates. But any time the rate commission denies an increase, Jim Donelon ALWAYS does the spokesperson job HIMSELF. 20% INCREASE IN THE RATE. How many millions of dollars has State Farm given JIM DONELON to run for office?????!!!!!
Posted By: V W On: 7/9/2014
Title: Allstate still has 2% hurricane deductible
And their rates were way better than State Farm's for us. We switched to Allstate this past February. And this is another reason why we're happy we did.