Photo of a hurricane-damaged street with an illustration of a document labeled "insurance"

Louisiana’s already struggling homeowners insurance industry is bracing for further fallout as a result of catastrophic Hurricane Ian.

Previous hurricanes like Delta, Laura, Zeta, and Ida have contributed to Louisiana’s insurance crisis, which is quickly becoming similar to the massive insurance debacle in Florida.

In both states, premiums have risen sharply — and some insurance companies have gone out of business entirely, leaving few options for homeowners. In some instances, unpaid claims are leaving homeowners high and dry as insurance companies combat financial struggles. 

These harrowing situations raise questions for Louisiana insurers and contractors alike: How will the ripple effect of Hurricane Ian shape the future? It could be bad news for contractors — particularly restoration contractors who rely on the insurance industry to underpin their ability to get paid.

More on storm coverage: Florida Suspends Certain Licensing Rules in Response to Hurricane Ian

Rising premiums, canceled policies, and closing businesses

Even before Hurricane Ian, Louisiana was dealing with expensive insurance premiums. 

For years, insurance companies in the Pelican State have been canceling policies or closing their doors entirely. This has left more than 100,000 homeowners with no option but to settle for Citizens, the “high-priced insurer of last resort, which recently asked the insurance department for a 63% rate hike,” according to Louisiana CBS affiliate KLFY. 

Now, with Hurricane Ian leaving coastal Florida communities in shambles and demonstrating the devastating financial impact of this type of storm, Louisiana homeowners will feel the squeeze even more.

“Homeowners in some disaster-prone areas, including New Orleans, are seeing their premiums double, with some required to pay an extra $3,000 per year,” Jon Schuppe of NBC News stated

The ninth defunct Louisiana insurance company this year officially went under in September, leaving the state’s homeowners desperate for coverage. The scarcity of insurance companies comes at a time when solid insurance is needed more than ever. Given its history of damaging storms in recent years, Louisiana is still dealing with a tremendous backlog of restoration and repair needs. 

A year ago, Hurricane Ida caused nearly $80 billion in damage in the state — and repair projects have been proceeding slowly. The pandemic and its associated supply-chain chokehold have only worsened this problem, as material prices have seen steady growth in the last year, according to Levelset’s Construction Materials Price Tracker

Unpaid insurance claims could negatively affect contractors 

Another issue at hand is unpaid claims: Recent data suggests over 26,000 claims have been abandoned as companies have withdrawn from Louisiana.

This has also happened in Florida — and it’s a situation that greatly affects contractors, who might encounter subsequent payment challenges. 

Levelset’s Iain Smith noted that “in the event of an insurer’s liquidation, it becomes considerably harder for a restoration contractor who is mid-project to get paid when the property owner has their insurance policy canceled.”

The likelihood of other roadblocks to Louisiana’s insurance crisis recovery entering the scene could be high. For example, issues like roofing scams, which can proliferate following destructive hurricanes, pose ongoing risks to insurance companies.

In Louisiana, insurers, homeowners, contractors, and government officials are on alert about the current crisis. Louisiana’s governor John Bel Edwards expressed his concern during a recent meeting with Lloyd’s of London, an established insurance market, to discuss the future of his state’s insurance industry. 

“Few states are more directly impacted by the insurance underwriting and energy markets than Louisiana, which is why it’s so important to maintain an open dialogue with global leaders in those sectors.” Edwards said.

“Thousands of Louisianans are not only still recovering from damage caused by devastating storms, but they are also dealing with unpaid claims, insurance companies folding, and problems finding new insurance coverage. We must find a way to solve this crisis.”

Contractors may be facing a stormy and uncertain future if current insurance trends in Louisiana and Florida continue.