Wooley, Kyle Battle for Louisiana’s Top Insurance Job

And then there were two.

That is the scenario for this month’s runoff election (Nov. 15) in the race to be the next insurance commissioner in Louisiana. The Oct. 4 primaries brought the field of candidates down to two—incumbent Robert Wooley and former legislative auditor Dan Kyle.

Wooley, a Democrat, snagged the most votes in the primary. His campaign has stressed his aggressive program of cracking down on fraud in the industry. Wooley is endorsed by New Orleans Mayor Ray Nagin and U.S. Sen. John Breaux, D-La.

Kyle, a Republican, has reportedly voiced criticisms of Wooley’s connections to the insurance industry. He has alleged that the three commissioners before Wooley were sent to prison in part because of corruption resulting from ties to the industry. Kyle is endorsed by Gov. Foster and U.S. Rep. David Vitter, R-Metairie.

In e-mail interviews, the two discussed the upcoming election, their qualifications, and their visions for the office.
Insurance Journal: What are your thoughts on the current state of the insurance market in Louisiana and what changes would you recommend in 2004?

Wooley: The insurance market in Louisiana is ready for some much needed changes that will be implemented in 2004. A major piece of legislation passed by the Louisiana Legislature this past session was prompted by my idea to reform the state’s high risk property insurance pools: the FAIR and Coastal Plans. This bill creates a tax-exempt corporation, the Louisiana Citizens Property Insurance Corporation, to hold money in reserve in case of a catastrophe, so insurance companies will be assessed by the Plans less often, for less amounts of money. I expect this new law to attract new companies to the state. Several companies have already
decided to write homeowners insurance
again in Louisiana since this bill passed, and more companies have expressed an interest in returning to our state.

Two years ago, I was successful in persuading the Legislature to scale back the powers of the Louisiana Insurance Rating Commission (LIRC). Six of the seven members of the panel are appointed by the Governor, and the seventh member, the Commissioner of Insurance or his designee, votes only on rate revisions in the event of a tie. The Governor vetoed that bill, but this past legislative session, I was instrumental in getting this measure passed and this time, the bill became law. This legislation to reform the LIRC creates a flexible rating system (Flex Band) and is expected to lead to more competition in the insurance industry, thus driving rates down.

Since becoming commissioner, I have publicly stressed the need for a hurricane, or catastrophe pool. After meeting with insurance commissioners in neighboring states about the feasibility of such a plan, the Louisiana Department of Insurance contracted with the company that set up the Florida CAT pool to come in and draft a proposal for a similar pool in our state. In August 2003, I received the proposal for the Louisiana Hurricane Catastrophe Fund (LHCF) from the company, showing how we can make this plan a reality. I plan to introduce legislation in the 2004 session to implement the LHCF.

Kyle: The insurance market in Louisiana is in crisis today. Insurance companies are leaving Louisiana in record numbers. This is hurting everyone—our citizens, our insurance agents, and our remaining insurance companies. The risk of loss now rests with only a handful of companies. One major hurricane could all but bankrupt even the most solvent of insurers. It is imperative that we make great strides to bring back insurers and increase competition. By increasing competition, I believe we can both diversify risk and lower rates.

IJ: Talk a little bit about the homeowners market in the state and any concerns, challenges, etc., that you see.

Wooley: The number of companies writing homeowners insurance in Louisiana has dropped from over 80 since before Hurricane Andrew in 1992, to about 20 or so writing statewide today. Only about a dozen of those companies are actively writing any insurance below Interstate 10. That’s a serious concern of mine because there is no competition.

My challenge has been to change the current regulatory system that has been in place for over 50 years in Louisiana. When I first took over as commissioner three years ago, I surveyed companies who were no longer writing in the state to see what it would take to get them to write here again. Of the 108 survey responses sent back
to me, without fail, the companies all listed the Louisiana Insurance Rating Commis-sioner (LIRC) as their main impediment to progress. That year, I was successful in persuading the legislature to approve a measure to scale back the powers of the LIRC but the governor vetoed that bill. Now, with the passage of legislation creating the flexible rating system (Flex Band) and the implementation of that law in January 2004, I expect a gradual strengthening of our homeowners market.

Kyle: A decade ago, there were 120 companies writing homeowners’ policies in Louisiana. Three years ago, when the incumbent became commissioner, we had only half that number. During the past three years another 30 or so have closed their doors in Louisiana. This out-migration has not only hurt our existing insurers, but also hindered economic growth. I want to reverse that trend. We need companies coming to Louisiana, not leaving it. It seems hard to imagine a world where the same commissioner under whose watch these companies left would be able to entice their return.

IJ: How do you feel the department has responded over the years when a catastrophe, like a hurricane or tornado, strikes the state’s residents?

Wooley: The Louisiana Department of Insurance has had a lot of practice (unfortunately) in responding to natural disasters. Since I became commissioner, our state has experienced a massive hailstorm in the greater New Orleans area of south Louisiana,
tornadoes on an Easter weekend in north Louisiana, flooding, tropical storms and hurricanes. So I know first hand how our employees react when disaster strikes. I dispatch teams of experienced department employees who are experts in the field of property and casualty insurance to affected communities to help consumers with their insurance needs and questions. This approach is very successful because I believe in taking the Department of Insurance to the people, not making the citizens of our state come to the Department of Insurance.

Kyle: The department has not been proactive in this area. I feel that when a disaster strikes, the Insurance Department should stand ready to help our citizens. I propose
establishing a mobile office that would travel to the affected area and be there to help the citizens, insurance agents and adjusters
rapidly respond to the disaster.

IJ: Talk a little bit about HB 1476, the surplus lines related measure that was passed this year, and whether you think it is a good or bad idea.

Wooley: I was very supportive of HB 1476. It was an important piece of legislation because Louisiana is the fifth largest writer of surplus lines insurance in the country. Without a healthy surplus lines market, the petrochemical and oil & gas industries in Louisiana would not be able to obtain insurance. And that’s the whole reason for surplus lines insurance. Without a healthy surplus lines market, these types of businesses would suffer, and that’s obviously bad for economic growth.

Kyle: We are fortunate to attract many surplus lines’ companies who write ample coverage in Louisiana. As I understand it, House Bill No. 1476 basically does two things. First, it allows unauthorized insurers to sue without obtaining a certificate of authority. Second, if the unauthorized insurer has an A.M. Best rating of “B” or better, it does not have to post bond before filing any pleading. I agree that if a company is financially sound, it should not be required to post a bond. If the company has the means to pay any final judgment, I see no need to unnecessarily increase insurance costs.

IJ: Three previous commissioners have had run-ins with the law in Louisiana. Do you feel the department has an image problem, and if so, what has or is being done to correct it?

Wooley: There’s no question that the problems of the three previous commissioners have not helped the department’s image. However, the Louisiana Department of Insurance has some of best, most well trained insurance professionals on staff in this country, so I believe the image of the employees has been left untarnished. And it’s the employees who make that department what it is, so from that standpoint, I feel the department has a great reputation. A few years ago, when I surveyed insurers who had left Louisiana, only one of the 108 responses I received back mentioned the corruption of the past, and that was way down the list, below the problems of our Insurance Rating Commission or our tort system.

So I believe our department is well respected by the public and insurers alike. I am not a politician and I only care about being Insurance Commissioner. And I have let the department’s employees, the public and insurance companies all know that I am serious about running a first rate insurance department, free from past corruption. I see myself as a very welcome change to the industry.

Kyle: The Insurance Department absolutely has an image problem—a problem that will not and cannot be corrected until there is a clean break from the past. The current administration was handpicked by the former Commissioner who went to prison. I believe it is time for a new beginning.
IJ: Are you a proponent of state or federal regulation and why?

Wooley: I favor state regulation of insurance. Louisiana was one of the first three states to join the NAIC’s ASSURE coalition, which is the grassroots effort to keep state insurance regulation in the hands of the states. State regulation is important to Louisiana for several reasons. One: I believe consumer protection is one of the most important jobs of any Commissioner of Insurance. I have been so successful at it that I have been named chairman of two NAIC consumer protection committees. The consumers of this state do not deserve to get caught up in the bureaucratic red tape of the federal government on insurance matters and I will fight that battle all the while that I am Commissioner. Two: The Louisiana Department of Insurance collects upwards of $130 million in premium taxes annually. This is money that would go to the federal government instead of our state’s general fund if insurance regulation were handled at the federal level. This would cause the state of Louisiana to suffer a huge financial burden.

Kyle: I strongly favor state regulation. Louisiana is unique in many ways and I do not feel that our uniqueness would be properly addressed at the national level. Besides, I feel that a Commissioner of Insurance elected by the citizens of Louisiana is accountable to the people; bureaucrats in Washington, D.C. will not.

IJ: How valuable are independent agents to the state and what advice would you have for them as they try and survive the hard market?

Wooley: I place a great value on the independent agents of this state. The leaders of both of this state’s independent agent groups are key members of my campaign team. Independent agents represent consumers and work hard to get the best product at the best price for their customers and I am very proud to have the backing of both of these groups. Independent agents are uniquely qualified to respond to the hard market because they represent more than one company so they can shop around for the best product for their customers. That’s why I think they understand quite well how to handle the hard market. The improvements I’ve made, with Flex Band and the Citizens Corporation, along with the legislative changes I am proposing next year, will greatly improve the insurance environment in Louisiana.

The Professional Insurance Agents of Louisiana and the Independent Agents and Brokers of Louisiana know I understand insurance and I understand the problems associated with a hard market. And they know I am working diligently and successfully to improve the regulatory scheme in our state. In 2004, I will take our message of reform to insurers across the country. Traveling with me will be legislators, members of the governor’s staff and independent agents. We will act as a Chamber of Commerce for the Louisiana insurance industry to let insurance companies know why Louisiana is now becoming a good place to do business.

Kyle: I believe that independent agents are highly valuable and necessary in Louisiana. Independent agents often represent numerous carriers and offer greater choices to consumers including writing difficult coverage. More choices mean greater competition and lower insurance rates.

IJ: If you had to say one good thing about your opponent, what would it be?

Wooley: I like his new hairdo.

Kyle: He is seldom right, but never in doubt.

To comment on this story, e-mail: dthomas@insurancejournal.com

Topics Catastrophe Carriers Agencies Legislation Talent Excess Surplus Louisiana Hurricane Homeowners Market