Louisiana Legislature offers few proposals for insurance crisis

The Louisiana legislature begins its annual session this week, and insurance proposals will certainly be on the front lawmaking burner. The current insurance commissioner made a really insightful statement last week. “We are currently in the midst of an insurance crisis,” Duh, you think? An insurance crisis that has been going on in Louisiana for over fifteen years, about as long as Rip Van Winkle was asleep, and it would seem that the Department of Insurance and the legislature are just waking up to the fact.
One of the proposals is to pour more state tax dollars into an incentive fund to attract more insurance companies into the state. When asked about this idea, the reaction for our U.S. Senator John Kennedy was: “We tried that one. It blew up in our face.” The Senator is right. In a special session a few months ago, the legislature handed 42 million dollars over to the insurance department. Few companies applied for the funds, and the majority that did took the tax dollars then went belly up. Now the department is asking for an additional $20 million for more incentives. So expect more bankruptcies.
Here is a partial list of proposed new laws. (Notice that I did not say proposed new bills. A bill is something I get in the mail for a purchase of service. Why do these insurance officials and legislators speak in gibberish?)
Under another proposal, Insurance companies could demand that policyholders have to go get a notarized sworn statement before they could even file a claim. So a family is devastated by a hurricane with no local services available and searching for cover over their heads. Before they can even get even basic help from their insurance company, they have to travel to who knows where to find a notary and also find an attorney or someone else to prepare a sworn proof of loss form, then hope the post office has not been shut down, send the form to the insurance company, and wait and wait to hear back. What a terrible piece of legislation, that is proposed to let the company delay any payment.
Then there is another effort to shore up this state-run Citizens Property Insurance Company. You will remember that Senator John Kennedy has said the Citizens was the worst, mismanaged company in the state back when he was state treasurer. The insurance department wants to prohibit any policyholder from receiving bad-faith fines when Citizens continues its habit of ignoring policyholders and failing to pay claims timely. Sen. Kennedy was right. Citizens has been a disaster from the get-go and should be abolished. It ought to tell us something that no other state has a state-run company like Citizens.
Policyholders need to keep the guard up when told by legislators that these proposed changes are going to keep insurance rates from going up. Remember it was two years ago when the legislature approved so called tort reform that the insurance commissioner promised would reduce auto insurance rates by 25%. So what happened? Have you checked your policy lately? Rather than rates going down, big rate increases continue to take place. Legislators were sold a bill of goods and they bought right into it. Now policy holders are paying the price. A Big price.
There are a few other proposals being offered by the insurance commissioner and legislators but most of them are little more than putting a finger in a collapsing dyke. So are there any significant changes that could be make outside of praying for no hurricanes? Yes, and I have listed a number of ideas in past columns. But the single most import concept is to have the Governor join in with other Gulf Coast state governors to form a joint insurance pool. Louisiana has huge weather exposure but is just too small to go it alone.
None of this is original or rocket science. It’s a matter of emphasis. And the Governor obviously has to become involved. In all but twelve states, the Insurance Commissioner is appointed. So congress will look to Governors to aggressively pursue these important concepts. There are ways to resolve this major insurance crisis. But it will take more focus and much stronger leadership.

Peace and Justice
Jim

Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide. You can read all his past columns and see continuing updates at http://www.jimbrownusa.com. You can also listen to his regular podcast at www.datelinelouisiana.com.