Insurer Group: La. Legislature Acts to Revive Marketplace

The Louisiana Legislature adjourned last week after sending to the governor a series of bills including one that abolishes the state’s insurane rating board.

The enactment of HB 960, which abolishes the Louisiana Insurance Rating Commission, was one of the session’s highlights as far as the insurance industry is concerned, according to Greg La Cost, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI).

“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 la Cost. “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.”

Another legislative proposal (HB 678) advanced by Gov. Blanco and Insurance Commissioner Jim Donelon offers economic development incentives to insurers that write property insurance and take policies out of Louisiana Citizens Property Insurance Corp. passed on the final day of the session. An amendment was added to the bill that would provide consumers with a tax credit to offset some of the cost of insurance policies. This measure is intended to provide incentives for small and medium size insurers to do business in the state and help reduce the size of Citizens.

Another positive development, according to La Cost, was the passage of HB 558, which provides for premium discounts or other adjustments for compliance with building codes and for damage mitigation when supported by actuarial data.

Also during the session 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.

However the final changes made to SB 204 which removed provisions that would have allowed insurers to use variable deductibles based on the region of the state was a major disappointment. In its final form, the bill changes the rule that requires insurers to provide coverage on a policy that has been in effect of three years. The bill now requires insurers to maintain coverage even if the policyholder files multiple claims during the three years that were caused by acts of God.

“Expanding the rule requiring insurers to provide coverage to policies that have been in effect for more than three years is counterproductive in the effort to improve the insurance marketplace in Louisiana,” said La Cost. “Insurers have an obligation to manage the amount of risk exposure they maintain. As a result, there are times when insurers need the flexibility to make business decisions regarding the expansion or contraction of their book of business. While on the surface this bill may sound pro-consumer, in reality it further ties the hands of insurers and acts as a disincentive for insurers to do business in the state. The three year rule takes away insurers’ ability to manage their risk exposure and that can lead to financial difficulties and even solvency issues.”

Another bill that that could produce a negative effect on the insurance market is HB 962, which removes the 10 percent premium differential in parishes where Citizens has 50 percent of the market and the Commissioner of Insurance has declared the parish to be noncompetitive. The bill allows Citizens to set its rates equal to the largest insurers in the area or at an actuarial sound rate and could place Citizens in direct competition with private market insurers. This bill could result in more consumers in Citizens rather than achieving the goal of reducing the number of policyholders.

“On balance, the Legislature acted responsibility and is continuing down a path that is positive for consumers and the insurance industry,” said La Cost. “This session we encouraged lawmakers to support the creation of a more competitive regulatory environment, look for strategies to attract new capital to the property insurance market and eliminate the rating commission because these things would be good for the state. To varying degrees they took important steps to accomplishing these key components that are essential to reviving the insurance marketplace.”

PCI is a national trade organization composed of more than 1,000 member companies.

Source: PCI

Topics Carriers Legislation Louisiana Market