State Farm Rate Increases To Impact Some Landlords
State Farm Fire and Casualty Co. is raising rates on small rental properties statewide and dropping wind and hail coverage in some coastal parishes.

State Farm, Louisiana's largest residential insurer, began increasing rates for new policies to cover single-family homes, duplexes and condominiums for rent on Dec. 15. Starting on Feb. 1, some 29,034 existing customers in the New Orleans area and other coastal parishes will lose their wind coverage and see rates rise on those same types of rental properties as their policies renew.

The increases are the first rate changes in State Farm rental policies since 2004. State Farm spokeswoman Molly Quirk said that part of the rate increase calculation is the value of cutting the wind and hail policy.

The Times-Picayune reports the move will put pressure on small landlords, who are already dealing with rising taxes and sanitation rates, at a time when affordable housing for renters is in short supply in the New Orleans area.

"I think it's clearly disastrous," said James Perry, executive director of the Greater New Orleans Fair Housing Action Center. "Every single cost that a landlord has, the landlord has no choice but to pass that on to the renter. This will give an across-the-board increase to the type of rentals that are most important in New Orleans: the mom and pop rentals."

Losing wind and hail coverage could also force small property owners to turn to Louisiana Citizens Property Insurance Co., the state-sponsored insurer of last resort, for coverage at a time when state officials are trying to whittle down the number of properties Citizens insures.

While the statewide average rate increase is about 18 percent, actual increases in southern Louisiana can be much higher.

In Orleans, Jefferson, and protected parts of St. Bernard and Plaquemines parishes, the average increase will be 59.2 percent, according to State Farm; in areas outside of levees in Plaquemines it will be 93.8 percent; and in areas outside of levees in St. Bernard, it will be 21.1 percent.

To help ease customers into the elevated rates, State Farm is capping premium increases at 30 percent the first year, and will phase in any additional increase in the second year.

Wind and hail coverage is being dropped on rental policies in Orleans, Jefferson, St. Bernard, Plaquemines, St. Tammany, St. Charles, St. John the Baptist, Terrebonne, Lafourche, St. Mary, Vermilion, Iberia and Cameron parishes.

State law limits the types of changes insurers can make in homeowners' policies once a customer has been with a company for more than three years. But Rich Piazza, chief actuary at the Louisiana Department of Insurance, said State Farm is free to drop wind and hail coverage on rental property owners, no matter how long they've been with the company, because the properties are not owner-occupied.