Louisiana flooding: Shockingly few have insurance in “major disaster”

Louisiana flooding: Shockingly few have insurance in “major disaster”

Louisiana flooding: Shockingly few have insurance in “major disaster” At least three are dead and more than 7,000 evacuated as rainfall continues to batter southern Louisiana, causing widespread flooding in what Governor John Bel Edwards called a “truly historic event” not likely to be over soon.

“This is a major disaster,” the governor said in declaring a state of emergency. “This is an ongoing event and we are still in the response mode.”

The rain, which hit parishes around Baton Rouge last week, continued Saturday and Sunday before moving west. There are record levels of flooding and cresting along rivers and creeks that have significantly damaged homes, businesses and highways.

Three drownings have also occurred, two involving vehicles submerged and swept away during the flooding.

Yet while emergency services, state police and public officials are busy responding to the disaster, insurance carriers and claims services associated with the National Flood Insurance Program are unlikely to be as busy.

According to NFIP data obtained by Insurance Business America, just 4% of home and business owners in the 11 most affected parishes have an in-force flood insurance policy. While more than 1.34 million people live in East Baton Rouge and surrounding parishes, only a little more than 58,000 carry coverage.

Statewide, 9% of Louisiana’s 4.65 million residents have an in-force policy. It is the third most-covered state in the US, behind Florida and Texas, yet it has also been plagued by the sharp drop-off in enrollment rates experienced by the rest of the nation.

The number of government-sponsored flood policies in force has plunged by nearly 10% in the past six years, from 570,000,000 in 2009 to just 5,151,000 in 2015. It’s a large fall, and in the opinion of Robert Hartwig, economist and outgoing president of the Insurance Information Institute, it’s only going to get larger.

“It’s sad to say, but that gap is going to increase,” Hartwig said. “People are reacting to price increases that have been put in place because [NFIP] is broke.”

Indeed, premium rates jumped 15% to 18% for new and renewal policies on primary homes nationwide, and 25% on secondary homes or homes that have suffered repeated losses.

Also contributing to consumer reticence toward insurance is a lack of significant flood damage, says Hartwig.

“Memories are short,” he said. “It’s been nearly 10 years since the last major hurricane in Florida – the longest span in history. And it does not take long for a gap between events for people to start questioning why they need this coverage.”

Unfortunately, those dropping their NFIP policies are not turning to the private market either. Part of the problem there is attracting insurance carriers to Louisiana, says Parke Ellis, chairman of Gillis, Ellis & Baker in New Orleans.

“The number one issue among agencies is needing new property markets – especially since Hurricane Katrina,” said Ellis, who determined the problem through a survey while serving as president of the Independent Insurance Agents and Brokers of Louisiana.  “There’s not a lot we can do about that.”

Yet Ellis sees hope for the state. While flood insurance rates may be low, insurance professionals in Louisiana have improved their ability to act on claims swiftly and ensure clients are prepared for the worst – including the most recent flood events.

“I feel we have a much more robust ability to respond to catastrophe since Katrina,” he said. “What we as agents have learned is that we’ve got to get clients prepared before it happens. Get them to start thinking about business interruption plans, evacuation plans and how they will prove their inventory to their carrier in the event of a loss.”

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