Of all the obscure parts of state government, the Louisiana Insurance Rating Commission is among the most ignored and misunderstood. And the panel may now be in its death throes.
The commissioners ostensibly have power to limit, restrict and otherwise regulate companies that write insurance policies. After the 2005 hurricanes, with the cost of property insurance shooting upward, some Louisiana homeowners look to the rating commission to help bring prices back down.
There’s little chance of that – and homeowners angry over insurance hikes shouldn’t take out their frustrations on the commission’s six members, who have little power over rates anyway.
They did at one time, but such government intervention in the marketplace amplified the perception – or maybe the reality – that good-ole-boy Louisiana was a lousy place to run an insurance business. Three consecutive insurance commissioners had spent time in federal prison. And the Insurance Rating Commission was an arm of government with the power to meddle in the free market, blocking rate increases and otherwise interfering with the business of making a simple profit.
So in 2003, then-Insurance Commissioner Robert Wooley persuaded legislators to pass a law that stripped the commission of much of its power. The new law meant the rating commission would only have power to block rate increases of 10 percent or more. So if your homeowners insurance company wants a 9 percent increase, it doesn’t need rating commission approval; it only needs approval from the insurance commissioner.
Wooley’s successor, Jim Donelon, says the law succeeded in persuading more companies to write policies here.
Donelon now wants to put the Insurance Rating Commission out of its misery altogether. Louisiana remains an unattractive place to sell insurance, Donelon says, because it’s the only state in the union with a rating commission meddling in the market.
The theory: doing away with the commission, stripping away government intervention, will make Louisiana a more attractive market for insurance companies; as more firms write policies here, competition will cause rates to drop.
Gov. Kathleen Blanco has said she might team up with Donelon and back legislation that would abolish the commission.
Some members of the commission, most of whom are the governor’s appointees, don’t like to be talked about as if they’re irrelevant. Barry Busada, a member from Shreveport, said he was offended to hear about Donelon’s plans while he and the other commissioners continue doing their work and attending the panel’s monthly meeting.
“If you get rid of the rating commission, you’ve got to come up with some kind of oversight, some kind of watchdog,” he said.
With little power to block private insurers from raising rates, Busada and the others have even less power – if any – over Louisiana’s fastest growing insurance company, the Citizens Property Insurance Corp., which is controlled by the state. The 2003 law that created Citizens includes a stipulation that apparently prevents the commission from blocking a Citizens rate hike, no matter how large.
The rating commission met last week, its members as always sitting in high-backed chairs, behind a massive desk. On the agenda were some big rate hikes Citizens was planning. Accustomed since the hurricanes to getting angry phone calls from homeowners, some commissioners were obviously uncomfortable at being forced by law into approving the increases – one of them for 138 percent.
Joe Godchaux Jr., a commission member from Opelousas, took the microphone and begged news reporters: please write articles that make it clear to the increasingly angry public that he has no choice but to vote in favor of the increase.
“I want the citizens of Louisiana to know: this was approved by the Legislature, and this is the law,” Godchaux said.
With commissioners publicly saying they’re powerless, Donelon should be able to find some leverage when he tries in a few months to strip Godchaux and the others of what little power they have left.
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