Continuing a trend to loosen regulation on insurance companies, a Louisiana state Senate committee advanced House Bill 1514, which allows business insurance providers to bypass Louisiana’s Insurance Rating Commission (IRC) when seeking rate increases, according to the Associated Press.
One senator expressed fears that the so-called file and use bill would simply give companies “carte blanche” to raise rates whenever they wanted, but he voted for the bill anyway, as did the other members of the Senate Insurance Committee. The senator, Donald Cravins, D-Arnaudville, who is himself in the insurance business, suggested simply doing away with the rating commission, an idea that met no objections on the committee.
The rating commission holds public hearings on proposals by companies wanting to raise insurance rates. Company representatives must defend their proposals before commission members, a few of whom regularly question the companies sharply about why the increases are needed.
The bill passed unanimously by the Senate Insurance Committee does away with this process for insurance companies offering property and casualty insurance to businesses.
They could simply file a notice that they are seeking a rate increase with the state Department of Insurance, instead of submitting themselves to the rating commission, which the companies dislike, saying it impedes their business. The increase would go into effect 45 days later unless it is blocked by the department.
The bill, sponsored by Rep. Karen Carter, D-New Orleans, follows a measure passed last year that also weakened the IRC’s regulatory authority. That bill allows all insurance providers, business as well as personal, to raise rates up to ten percent without going through the commission. Proponents call this “flex-band.”
Advocates for these measures, including the Louisiana Insurance Commissioner, Robert Wooley, say they will make the state more attractive to insurance companies, increase competition, and lower rates. Wooley was criticized last year during his successful election campaign for being too close to the industry he regulates: taking contributions from major insurers, and forming his campaign team from industry lobbyists.
Meanwhile, rates haven’t decreased so far, though companies have made extensive use of “flex band,” with 160 filings logged by the department as of early March. Wooley told the committee Wednesday some 16 new companies are writing insurance in the state since the passage of “flex band” last year.
The bill now advances to the Senate floor. The thrust of these changes met with some skepticism from Cravins. “The average person in Louisiana is just having to pay more and more for property insurance,” Cravins said. “What we did with flex-band was, we gave companies a windfall.”
The senator acknowledged that “competition will make the rates stabilize.” But he added that “the problem is, we’re giving companies that operate in the state carte blanche to raise rates as much as they want. Raise rates, do whatever you want.”
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Legislation Commercial Lines Louisiana
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