La. Lawmakers Grill Insurers Over Slow Claims Process

January 23, 2006

Louisiana state lawmakers have been fielding complaints – from constituents, family and friends – over how long it’s taking to get paid on claims filed due to Katrina and Rita and on Jan. 20 took turns grilling insurance company representatives about the slow process.

Taking the brunt of the questions was Terry Lisotta, chief executive officer of Louisiana Citizens Property Insurance, a quasi-state agency formed to provide a safety net of last resort insurance for high-risk areas or individuals.

Citizens’ premiums are controlled by Louisiana law and are priced at 10 percent above the average rate of top insurers by parish. The rates, by design, are not competitive.

Sen. Derrick Shepherd, D-Marrero, told a joint meeting of the House and Senate Insurance committees that Louisiana Citizens was created for the right reasons but it is not working. “Sometimes the road to hell is paved with good intentions,” he said.

Shepherd said he was “sick and tired” of hearing the same complaints from residents:

— An adjuster never came out.
— An adjuster came out, but hasn’t been heard from since.
— I can’t get anyone on the phone.
— I can’t get my check.
— The company lost my file.

“This plan is broken,” Shepherd told the panel. “It needs to be fixed in all due haste.”

Sylvia Randolph of New Orleans said she had to hire an attorney to resolve her claim with Louisiana Citizens. She noted her home had wind damage, but nothing due to flooding. Still, she couldn’t get an adjuster to come out. “Finally, I get someone on the phone and she told me, ‘Miss, you have a problem and you need to pray.’

“I was totally disgusted,” Randolph said. “But once I obtained a lawyer, I got phone call after phone call about the claim. I think that’s totally unjust.”

Linda Gentry, who hired the same attorney, said the company put her through the same run-around. “It’s upsetting to pay premiums every year then have to go through this,” she said.

Lisotta said the company is constantly fighting to retain adjusters. He said they hired adjusters from out-of-state to work on Katrina claims then some had to return to their home territories to handle claims due to hurricanes Rita or Wilma. “That may have been the reasons why some residents had two or three adjusters,” he said.

“We were never set up to be a full-fledged, multiline operation. We are a back stop,” he said. “And though it’s (the claims process) not going as fast as some would wish, it is getting done.”

As of Jan. 20, Lisotta noted that the company had paid $420 million in Katrina losses – 55 percent of claims filed, compared to $60 million or 59 percent due to Rita.

Rep. Cedric Richmond, D-New Orleans, questioned why more claims filed due to Rita were closed than those filed by Katrina survivors.

The adjustments have moved quicker in areas affected by Rita, Lisotta said. “We had better access to the properties and security was not an issue as it was with Katrina claims. Also, when the water came in for Katrina, it stayed. For Rita, there was less water and it left quicker.”

Richmond, along with Sen. Edwin Murray, asked Lisotta to “find” the adjuster assigned to work their claims. Richmond also asked him to explain why his first contact with Citizens is a notice that his premium was increasing.

“It offends me to pay a bill for an increased premium when they (Louisiana Citizens) owes me 10 times that. If I have a claim filed, why can’t you take it out of the money that’s owed me instead of me trying to come up with $1,300, $1,100 or whatever it is?”

“If state law allowed me to do that we would,” Lisotta said. “We can’t take money from one policy year to apply it to the next policy year.”

Rep. Karen Carter, chairman of the House committee, said the committee planned a thorough review of Louisiana Citizens to see what needed to be done to resolve the issues.

“We’ve created something that was intended to be a great service to Louisiana citizens but in reality, the laws may not be in tune to adequately work with our clients,” she said. “If things in the law need to be tweaked, we better get to tweaking.”

The committee also heard from other insurance company representatives, who acknowledged mistakes in some cases and promised to resolve problems in others.

Sue White, of Liberty Mutual, said 83 percent of Katrina claims were closed as were 91 percent of claims filed after Rita. And, Mark Welzenbach, for Hanover Insurance, said 90 percent of the claims filed after Katrina were closed with some 200 (m) million dollars paid out.

The committees planned to meet again following the special legislative session, set to begin Feb. 6, to see whether complaints heard Jan. 20 had been resolved.

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