Citing Better Codes, State Farm Back On Louisiana Coast
August 15, 2007
By Lavonne Kuykendall
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Almost one year after deciding to stop writing new homeowners insurance policies along Louisiana's Gulf Coast, State Farm Insurance Co. has changed its mind and said Tuesday it will begin accepting new applications Wednesday - but only from existing customers.
The Bloomington, Ill., insurer, the largest in the U.S. and in Louisiana where it has a 32% market share, said a recent strengthening of the Louisiana building code was a key reason for the change.
In addition to accepting applications from current State Farm customers along the coast, State Farm will take on some new business in more inland areas, said Gary Stephenson, a State Farm spokesman.
"Having a statewide building code passed was a positive" that made a difference in the company's willingness to take on new customers and write policies for existing customers as they rebuild their coastal homes or move to new homes along the coast, Stephenson said.
In September 2006, State Farm stopped writing new homeowners coverage along the coast as it struggled to satisfy customer claims there in the aftermath of 2005's Hurricane Katrina, which devastated the area.
Other insurers have cut back in the state as well, and Louisiana insurance commissioner Jim Donelon said in an interview Tuesday that very few insurers would write new policies for homeowners who lived within 50 miles of the coast.
Next-largest rival Allstate Corp. (ALL) will write "new to Allstate" policies along the coast, but imposes restrictions, Allstate spokeswoman Kate Hollcraft said via email. It will only consider for coverage auto insurance customers who have had their auto policy with Allstate for a minimum of two months. The policies will not cover wind or hail damage.
Earlier this year, Allstate challenged thousands of Louisiana homeowners customers to prove they were living in their homes or in the process of repairing Katrina-related damage, or face cancellation of their policies.
Donelon asked Allstate to give homeowners a chance to respond to the insurer. Allstate also ran afoul of Donelon when it proposed dropping wind coverage on its homeowners policies in the state.
But Donelon said Tuesday that because the two largest insurers have a combined market share in the state of more than 50%, which is considered very high, he is focusing now on drawing in other insurers to Louisiana, and is offering grants of up to $10 million to "strong regional insurers" that agree to write homeowners policies in the state.
As the second anniversary of the 2005 storm approaches on Aug. 29, homeowners and other property owners are approaching the two-year deadline for customers to file lawsuits over Katrina-related insurance claims, and Donelon said there was no possibility of an extension of that deadline. The deadline was originally set at one year, but the state Legislature extended the deadline to this year's storm anniversary.
- By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com