Package of insurance measures passes La. legislature

Rating commission to be abolished; insurer incentive plan approved

Louisiana’s Legislature in June approved a package of insurance bills promoted by Louisiana Gov. Kathleen Babineaux Blanco and Insurance Commissioner Jim Donelon. Among the bills passed were one that provides for $100 million in incentives for insurers to write property insurance in the southern part of the state and one which abolishes the Louisiana Insurance Rating Commission, the last of its breed in the United States.

“I am very pleased with the outcome of the regular session wherein the Legislature demonstrated remarkable interest and commitment to making a more attractive market for insurers doing business in our state in the aftermath of the Rita/Katrina catastrophes,” Donelon said in a statement released by the Louisiana Department of Insurance. “This follows on the heels of positive steps taken in two special sessions by the Governor post Rita/Katrina that resulted in the passage of our first ever statewide building code and re-enactment of a tax credit on all assessments made by Citizens as a result of the two hurricanes.”

According to LDI, the centerpiece of the Blanco/Donelon Insurance Package was HB 678, which establishes the Insure Louisiana Incentive Program. Passed on the last day of the session, it gives $100 million to qualified insurance companies in $2 million to $10 million increments if the companies match the state’s portion with their funds and have a minimum of $25 million in assets. This bill includes tax credits in 2008 for policyholders whose homeowners insurance rates went up after Katrina and Rita. It allows for a credit of seven percent of premiums and will provide an estimated $105 million to $110 million in credits statewide.

According to the Property Casualty Insurers Association of America (PCI) passage of HB 960, which abolishes the rating commission as of Jan. 1, 2008, was one of the session’s highlights as far as the insurance industry is concerned. Rate-setting authority will be passed to the Commissioner of Insurance.

“This has been an industry goal for many years and the move will help consumers by removing one of the major obstacles to attracting insurers to the state,” said PCI Assistant Vice President and Regional Manager Greg La Cost in a statement released by the trade group. “Rating commissions add an additional layer of regulation that is unnecessary. Over-regulation adds costs, hinders competition and limits consumer choice. Consumers are better served when states operate more market-oriented approaches to insurance regulation.”

In addition to HB 678 and HB 960, other approved measures from the Blanco/Donelon package include:

HB 558 – Provides for premium discounts or other adjustments for compliance with building codes and for damage mitigation. This bill will lower insurance premiums on properties constructed and/or modified to comply with the state’s new building code. It mandates that an insurer requesting a rate revision shall also provide an actuarially justified discount, credit, rate differential, adjustment in deductible, or other adjustment to reduce the insurance premium when the property owner builds or retrofits a structure to comply with the requirements of the State Uniform Construction Code or installs mitigation improvements or retrofits their property utilizing construction techniques demonstrated to reduce the amount of loss from a windstorm or hurricane. Inspection and certification requirements are established regarding compliance with the bill.

SB 204: Provides that the phrase “two or more claims within a period of three years,” which is an allowed reason for canceling, failing to renew or increasing a policy deductible in an insurance policy, does not include any loss incurred or arising from an “Act of God” incident that is due directly to forces of nature and exclusively without human intervention. This clarifies an ambiguity in existing law some insurers were using to non-renew homeowners policies.

SB 205: Creates an Office of Consumer Advocacy in the Department of Insurance and enforcement of an Insurance Consumers Bill of Rights by the Office, which includes a list of rights and protections for Louisiana consumers. The office will provide direct assistance and advocacy for consumers that have requested assistance from the insurance department and must be set up by Oct. 1, 2007.

SB 153: Provides for the depopulation of the Louisiana Citizens Property Insurance Corporation. This allows for policies held by Citizens to be bundled in groups of 500 and offered to insurance companies at least once a year. At least 25 percent of each bundle will be policies in the coastal parishes and 75 percent will be homeowners policies. Takes effect Nov. 1, 2007, after SB 195, which authorizes Citizens to bid out all of its business at one time.

Bills proposed by the insurance department that passed include:

HB 381: Provides that a property insurance policy may not limit the insured’s right of action against the insurer to a period of less than two years when the claim is a first party claim. This bill changes the period for filing action against an insurer from 12 months to 24 months.

HB 472: Provides relative to the recoupment of Louisiana Citizens Property Insurance Corporation assessments and deletes its credit schedules under the FAIR and Coastal Plans. This bill removes premium assessment subsidies, and removes excessive and duplicative assessment charges on a policyholder. It fairly allocates Louisiana Citizens Property Insurance Corporation’s assessments to all policyholders and allows for pro-rata calculation based on premium over the life of the policy.

HB 481: Provides for a flat annual $1,000 financial regulation fee per year on all companies in lieu of an hourly rate for examinations. This bill takes effect on July 1, 2007.

HB 499: Provides for fees collected by the Commissioner of Insurance. It simplifies fees and provides for an overall reduction in fees charged to insurers in Louisiana.

HB 596: Provides for the protection of innocent coinsureds and the effect of misrepresentation of an insured to an insurer. This bill preserves the right of innocent coinsureds to recover their proportionate interest under a fire policy in the event a fire related loss is determined to have been caused by another named insured.

PCI said lawmakers rejected bills that would have allowed punitive damages for insurance claims and one that would have required insurers to write any home that is constructed in compliance with the uniform building codes without regard to any other underwriting criteria.