Homeowners Drop Insurance After Katrina
Monday, March 19, 2007; 4:37 PM
NEW ORLEANS -- Disgusted with his insurance company after Hurricane Katrina, the Rev. Simmie Harvey let his homeowner policy lapse and left his house in the hands of a higher power.
Somebody up there must like the 88-year-old Baptist minister: His newly uninsured house escaped serious damage last month when a tornado ripped through the city's Uptown neighborhood and toppled a tree that narrowly missed his home.
"I wasn't lucky. I'm blessed," he said. "I'm going to be all right. The Lord takes care of me."
Facing soaring premiums or feeling shortchanged by their insurers, a growing number of homeowners and businesses in Louisiana and Mississippi are "going bare," or dropping their coverage altogether, insurance agents and consumer advocates say. Many more are drastically reducing their coverage.
"I have every belief that it's going to be more and more common," said Amy Bach, executive director of the United Policyholders advocacy group. "If it's a choice between eating or paying their insurance bills, of course they're going to eat."
With the new hurricane season beginning June 1, it is a risky strategy. These people could lose everything in a storm or some kind of tragic accident around the house.
"You're basically playing Russian roulette with your most valuable asset," said Robert Hartwig, president and chief economist of the Insurance Information Institute, an industry-funded group.
Elderly homeowners _ particularly those on fixed incomes and those who have paid off their mortgages _ may be the most likely to go uninsured. Most homeowners don't have that choice, because mortgage companies require borrowers to have insurance. Those whose homes are paid off can drop their policies, unless they are getting government grants or loans that require one.
"Definitely, you'll be seeing more of this," said Bennett Powell, a Metairie insurance agent whose firm sold Harvey his policy.
Exactly how many policyholders are going bare is unclear. The insurance commissioners in Mississippi and Louisiana are not keeping track, and insurers say they do not how many of their former customers are simply buying new policies from a different company.
Shopping around can also be a risky strategy, because homeowners in Louisiana who switch are no longer protected by a state law that bars insurers from canceling policies that have been in effect for three years or longer.
"Do not shop," said Louisiana Insurance Commissioner Jim Donelon. "That protection outweighs the advantage of shopping, in my opinion."