LA. RATING BILL NOW LAW:

Louisiana Gov. Mike Foster allowed Senate Bill 721—which lets insurance companies raise or lower their automobile and property insurance rates by as much as 10 percent per year without the approval of the Louisiana Insurance Rating Commission—to become law without his signature. The law facilitates Louisiana’s most significant insurance deregulation in many years and goes into effect Jan. 1, 2004. According to the New Orleans Times-Picayune, Foster had “serious reservations” about the bill, which has its share of critics. Opponents fear it will give free rein to insurers to raise premiums unchecked, while its backers believe it will bring more insurance companies into the state and foster competition. SB 721 was sponsored by Sen. John Hainkel, R-New Orleans. National Association of Independent Insurers counsel, Greg LaCost, applauded the bill stating that it “provides more flexibility to the state’s insurance rate-making process while maintaining government oversight of insurance rates.” The NAII is a founding member of the Coalition to Insure Louisiana, a broad-based group of businesses and other organizations that supported enactment of SB 721, and has been pushing other insurance reform legislation in the state. Foster may have had reservations about the bill, but he noted in a statement that he talked with the South Carolina insurance commissioner, who said that competition has increased and rates have stabilized in the state since South Carolina began using the flex-band rating approach. The NAII, which believes the measure will help ease the availability and affordability crisis being experienced in Louisiana, said that during the past decade, the number of companies offering property insurance coverage in Louisiana has dwindled from about 120 to less than 20, and few of those that remain write new policies. Critics fear, however, that under the new law insurers would be able to raise rates in some areas by more than 10 percent, because that figure is a statewide threshold. A company could feasibly lower rates in some parts of the state in order to impose a greater than 10 percent hike in higher risk areas, such as New Orleans.

Topics Louisiana