Insurance chief touts reforms
But critics say laws favor the industry
By Ed Anderson
Wednesday, July 04, 2007
BATON ROUGE -- The Legislature passed "significant" changes in the state's insurance laws, balancing the interests of consumers and the insurance industry in its just-ended session, Insurance Commissioner Jim Donelon said Tuesday, but consumer advocates said the session was too tilted toward the industry.
Donelon said the two major accomplishments of the session were the passage of a bill setting up a $100 million pool of money to lure new insurance companies to the state; and a bill to abolish the Louisiana Insurance Rating Commission, the nation's last insurance regulatory, by Jan. 1.
The insurers must match the $2 million to $10 million grants the state puts up, must have at least $25 million in assets and must agree to write new policies, including 25 percent for current customers of the Louisiana Citizens Property Insurance Corp., the state-run insurer of last resort.
Donelon said his office has received about 10 inquiries from insurance companies that want to participate in the grant program. He said he will go to Charleston, S.C., next week to meet with officials of a company that "wants to take advantage of the program" and set up business in Louisiana.
He said the program is designed to generate at least $400 million in new insurance capacity for homeowners in the state.
Sen. Walter Boasso, D-Arabi, who is running for governor, amended the bill to grant a one-time 7 percent tax credit in 2008 on all homeowners insurance premiums.
'No real relief'
M. Paige Freeman Rosato, a Mandeville attorney who works with the insurance consumer group United Policyholders, said the only thing that consumers got was the promise of a tax credit for next year, whereas insurance companies get the $100 million pool now.
"I don't see anything but a potential tax credit," Rosato said. "I don't see anything that helps consumers."
She said that although lawmakers approved and Gov. Kathleen Blanco has signed into law Senate Bill 205 by Sen. Donald Cravins, D-Opelousas, to set up an Office of Consumer Advocacy for policyholders, they put it in Donelon's office and not in another state agency, such as the attorney general's office or the governor's office.
Inherently, that is not good" because the commissioner hires the advocate, she said. "There was no real (consumer insurance) relief," Rosato said. "I expected more. . . . People need immediate relief."
The advocacy office must be set up by Oct. 1. The law says that if the commissioner wants to fire the advocate, he or she must notify lawmakers 10 days in advance.
Rep. Karen Carter, D-New Orleans, chairwoman of the House Insurance Committee and sponsor of the two bills Donelon singled out as "more arrows in the quiver" to make the state more attractive to the industry, said the session did what it could to encourage private insurers to locate to the state "so more insurance options are available."
Rating panel to be nixed
The second major bill that lawmakers passed was eliminating the seven-member rating commission. The industry has long said the political appointees -- six named by the governor and one by the insurance commissioner -- have artificially depressed rates for political purposes for years.
"This makes it more attractive for the insurance companies to do business in the state," Donelon said. Starting Jan. 1, his office will be vested with the power formerly held by the commission: approving or rejecting rate changes of more than 10 percent. The commissioner's office must approve or reject the rate sought within 45 days or the rates go into effect automatically.
Donelon said consumers who build new homes or renovate existing ones to meet the statewide building code or retrofit their structures to make them more storm-resistant must be offered discounted insurance premiums, under another bill passed in the Legislature. Rosato said that might not be much help in the short-term because the work will have to get done first and insurance companies might not offer much of a discount.
Donelon said the industry did not get a bill that would have allowed it to charge varying deductibles around the state. Under existing law, the same deductible must be charged statewide for the same type of insurance.
Reducing La.-run policies
An effort to lower the number of policies now insured by the Louisiana Citizens Property Insurance Corp., came in SB 153 by Sen. Reggie Dupre, D-Montegut, which requires the state insurer to bid out at least 500 of its policies once a year to private insurers, Donelon said.
At least 25 percent of those policies must be in coastal parishes and 75 percent must be homeowners policies, Donelon said.
That bill goes into effect Nov. 1 after another measure, SB 195 by Sen. James David Cain, R-Dry Creek, has a chance to work. Cain's bill will allow the treasurer to issue bids asking private insurers to take over all of Citizens' business. Donelon expressed reservations about the bill but said he will give it a chance to work. "I'll do a backflip" if a company wants to take over all of the 140,000 Citizens policies, he said.
Donelon said consumers also will get a break in a bill by Rep. J.P. Morrell, D-New Orleans, that requires that for three years, the 10 percent state-required markup on Citizens policies be dropped in all hurricane-affected coastal parishes and in any parish where the agency has more than half the market.
The Legislature also enacted a bill giving policyholders up to two years, instead of one, to file suit over claims disputes against their insurers.
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Ed Anderson can be reached at eanderson@timespicayune.com or (225) 342-5810.
