For those who like to play Ping-Pong (or more formally Table Tennis), what is occurring to homeowners in the State of Louisiana, should strike more than a few similarities to the game. As a business ethics speaker, business ethics consultant and book author, it is easy to see that the paddled ball in this newer, more expensive game is the homeowners.
Rebekah Castor writing for FOX Business (January 17, 2023) noted the simple truth of this “game,” that “Thousands of folks in the south no longer have home insurance because companies are leaving the area after years of devastating storms.”
20-Plus Companies are Gone
In a span of about 24-months, about one insurance company a month has filed for bankruptcy or fled the state. When this happens, already cash-strapped consumers are forced to go without insurance or are required to pay exorbitant rates because major insurance companies can. It is recognized as a crisis.
According to the state insurance commissioner:
“800,000 claims were filed after Laura and Ida, resulting in insurers paying $23 billion for insured loses.”
However, the rate hikes and bankruptcies are not simply attributed to Louisiana’s problems but are allegedly world-wide. Continued the commissioner:
“Our regional industry is backed up by the international reinsurance market and that market has been impacted not just by our horrible hurricane seasons, but also hurricane Ian in south Florida this past year, record wildfires in California and Australia, and record flooding in Germany.”
Heard it before
As a business ethics speaker, business ethics consultant and ethics book author, I have heard these types of excuses all too often. The FOX Business article states that Louisiana home insurance costs, on average, more than $2,000 per year. The rate is allegedly 46% higher than the national average.” Indeed, they may pay up to $5,000 annually through the Louisiana Citizens Property Insurance. Many are forced to flee the state.
According to the insurance commissioner, “one solution the state hopes for is more of an immediate fix: an insurance incentive program that would offer millions of dollars in grants to companies who commit to doing business in Louisiana.” Another solution is a program designed to give out low-cost loans to help homeowners fortify their roofs.
However, and from an ethical perspective, there needs to be a more thorough examination and discussion of these issues. In states such as Florida, many insurers have stopped selling homeowner insurance altogether. Is it due to Florida’s specific problems or nationwide? Do companies have a sort of red-lining where once a painful threshold is reached they find it easier to pull-out?
According to Standard & Poor’s:
“Between January 1, 2022 and May 18, 2022, home insurance companies were approved for rate increases in nearly every state.”
Nationwide, about 93-percent of homeowners carry insurance and while Louisiana was about $2,009 on average, states such as Oklahoma are significantly more expensive. The rates keep increasing even in years the storm activity is down. Where are the excess funds going?
It does seem as though insurance patterns are a capricious checkerboard. The trillion-dollar insurance industry almost seems to be a secretive club. Ethically, the question needs to be asked as to how much, exactly, are the insurance companies making in this supposed time of climate crisis?
This question is brought to light as it has been determined that healthcare insurance has become a very lucrative business despite the hand-wringing the industry has projected. How much of the homeowner insurance dilemma has been created not because of claims but due to stock price and Wall Street pressure?
It seems rather convenient to throw out terms such as a $23 billion payout in Louisiana without explaining how much you may be making in New York or Arkansas for that matter. Much like the pharmaceutical industry, the insurance industry is a perpetual black box on information. Before any more policies are canceled and shortfalls are taken as fact, it may be time to turn on a few lights.
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