[StBernard] Many in New Orleans can't afford insurance

[Westley Annis]

Many in New Orleans can't afford insurance 
A year later, private insurers still retreating from hurricane-scarred
region
The Associated Press


Updated: 2:26 p.m. CT Aug 27, 2006
NEW ORLEANS - Attorney Vallie Schwartz fell in love with the 130-year-old
Victorian shotgun in the French Quarter, which like all grand houses in this
former Spanish enclave has tall, cathedral ceilings and brightly painted
cypress shutters.

A successful personal injury lawyer, she could comfortably afford the
mortgage on the half-million-dollar house, so she made an offer - one that
was soon accepted.

That was before she knew how much it would cost to insure the property: The
best quote she got from a private insurer was nearly $10,000 per year, or
over $800 a month on top of her monthly mortgage - far more than she had
budgeted and enough to price her out of the house.

"I'm in the higher income bracket in this city, and I can't afford that. I
just saw my money floating out the window," says Schwartz, who pulled out of
the deal and is still living in a rental one year after losing her house to
flooding.

To a bruised economy still reeling from Hurricane Katrina, add the most
recent challenge: Finding affordable insurance. With private insurers
retreating from this hurricane-scarred region, residents in New Orleans are
facing a new economic reality.

Mortgage brokers are penciling in hundreds of extra dollars to the New
Orleans loans they're writing to account for soaring insurance premiums.
Those living in condominiums are being slapped with hefty increases in their
condo dues, the result of a spike in the buildings' wind and fire coverage.
Hotel and inn owners are paying more, too - an especially heavy burden at a
time when tourists are scarce.

Most affected of all are new homebuyers, who are trying to secure insurance
in a landscape few insurers will touch.

"It used to be the conversation went, 'What's the price? What's the square
footage? And where is it located?"' says local real estate agent Richard
Jeansonne, co-owner of French Quarter Realty. "Now the conversation is,
'What's the price? What's the square footage? Did it flood and can I get
insurance?"' he said.

Often, the only insurance new homebuyers in New Orleans can get is through
the expensive state-run pool. That pool, modeled after one created in
Florida in the aftermath of Hurricane Andrew, was meant to be the option of
last resort; by statute it charges 10 percent more than the top private
insurers in any given region.

But as of last month, Florida's pool became the No. 1 insurer in the state
with 1.2 million policies. In Louisiana, the state's pool, known as
Louisiana Citizens Property Insurance Corp., is receiving 400 new
applications a day and is expected to spike to 200,000 policies by year's
end, a 63 percent jump from 2005 when it had 135,000 policies. Dealing with
the state-run pool is also an added hassle: It takes between three to five
weeks for an application to be processed and with a ballooning work load,
homeowners can rarely get through the jammed phone lines to speak to
customer service.

"Rather than the last resort, it's become the market of only resort," said
Robert Page, an insurance broker who heads the state chapter of the National
Association of Professional Insurance Agents.

The lack of affordable options has led some homeowners to buy houses just
outside the New Orleans city limit, where private insurers are still
accepting new customers.


With another baby on the way, Andrea and Luis Espozito had outgrown their
1,200-square-foot condominium in New Orleans and were looking to buy a house
in the Garden District, the upscale neighborhood of colonnaded mansions once
home to vampire chronicler Anne Rice. They quickly learned that a
3,000-square-foot house listed at under $1 million would come with a
$17,000-a-year insurance premium.

So they did what many proud New Orleanians would consider unthinkable: They
moved to Metairie, a suburb 9 miles outside New Orleans. There, they bought
a 3,000-square-foot house that put them back $6,000 a year in insurance -
still high, but far more affordable than the city rates.


"When someone calls me asking for a quote, the first thing I ask is, 'What's
your ZIP code?' Unfortunately, your ZIP code is your ZIP code. There's no
way around it," says insurance broker Juliana Williamson of Parish National
Insurance Agency, a local broker.

Those intent on staying within a City of New Orleans ZIP code are
drastically revising how much house they can afford.

Tulane University professor Claudiney Pereira thought he'd found a deal: A
house within walking distance of the classroom where he teaches
macroeconomics. He made an offer, a closing date was set and the professor
bought cardboard boxes in anticipation of his move.

But like so many others, the deal was derailed when he discovered the only
coverage he could get was through the state-run plan and would cost him $400
on top of his $1,800-a-month mortgage. Now, he and his wife plan to look for
a house that's 30 percent cheaper - a budget that likely will price him out
of the neighborhood, forcing him to drive, instead of walk, to work.

To be sure, there are other financial factors at work. Both the Pereiras and
the Espinozas balked at the high property taxes in the Garden District,
while in the 300-year-old alleys of the French Quarter, attorney Vallie
Schwartz knew she would also need to budget for parking, as well as for the
price of new furniture. Like many in New Orleans, she lost everything when
her home on the shores of Lake Pontchartrain flooded last year.

The impact of insurance on New Orleans mirrors what's already happened in
hurricane-prone Florida.

There, insurance is to blame, say experts, for the what may be the beginning
of an exodus from the Florida Keys. Over the last five years, over 4 percent
of the population of Monroe County, which encompasses the Keys, has uprooted
itself, according to census figures.

Residents there speak of insurance premiums doubling every year, forcing
some homeowners to "go naked" - having no insurance at all. Realtors say
inventories are at more than double what they were a year ago and "For sale"
signs seem never to come down.

One of them is now pitched outside the home of Barbara and Harold Polsky in
Port Richey, Fla., who began packing their bags, planning to move to
Roanoke, Va., after their insurance premium doubled this spring.

"It broke our hearts to put up that sign. My wife hoped to die in this
house. We love it here, but we just can't afford it anymore," said Polsky,
49. "I know what's coming in New Orleans because we're living it now."


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