La. Isn’t the Only Coastal State With Insurance Troubles

March 12, 2007

Eighteen months after the hurricanes, “crisis” is the term everyone uses to describe Louisiana’s insurance problems. The governor spends much of her time begging insurance companies to continue doing business in Louisiana, hoping that more competition will bring rates down.

But in some ways, things could be worse. Mississippi has its own problems that make insurers skittish about doing business in that state. Florida has a new set of laws that injects the government in the middle of the free market – an abhorrent thought to the insurance industry.

Some Louisiana lawmakers will want to tinker with the state’s insurance laws when they return to the Capitol next month – partly because the vast majority are running for re-election or for another elected job. Attacking the unpopular insurance industry might look like smart politics.

It might also be smart to consider the advantages Louisiana still has over other states, and consider that getting vengeance on insurers might make things worse.

Jim Hood, Mississippi’s attorney general, has turned off insurance companies with his attempt to force them to write property insurance policies in that state.

And Mississippi is an unpleasant insurance market because of the greater potential for expensive lawsuits.

Led by U.S. Sen. Trent Lott, south Mississippians have flocked to the courthouse to sue their insurers over Hurricane Katrina claims. Not surprisingly, the early returns show that juries are sympathetic to homeowners, not big insurance companies.

In January, a jury clocked State Farm with a $2.5 million penalty, in a suit brought by a couple whose Biloxi home was damaged by Katrina. The judge reduced it to $1 million.

Another State Farm case was settled last week without punitive damages, though the plaintiffs wanted $5 million for the dispute over their Ocean Springs property. More big-money Katrina cases are set for trial this month.

In Louisiana, insurers don’t have to worry as much about lawsuits because state law severely restricts the amount of punitive damages. The next hurricane will force insurance companies to pay claims in Cameron or Morgan City or New Orleans – but at least they won’t have to juggle dozens of million-dollar lawsuits.

Election-year politics will be tricky for Louisiana lawmakers who represent areas south of Interstate 10, where homeowners policy rates have jumped.

But they should also remember that lashing out against the insurers might drive them away – making homeowners and commercial policies even more expensive and harder to find than they are now.

“I want to beat (insurers) over the head, I just don’t want to knock them out,” said Rep. Troy Hebert, a frequent critic of the industry, who once chaired the House Insurance Committee. “If they pack up their marbles and go home, what have I done to help my constituents?”

Florida might be an example of being a little too tough.

Florida’s new governor, Charlie Crist, has emerged as a loud critic of the insurance industry, backer of a new law that essentially forces insurance companies to lower their rates after June 1. Crist also backed an interim rule preventing them from raising rates before that date.

There is some danger that Louisiana’s lawmakers will go too far.

It’s also remarkable that they’ve waited so long to do anything at all about the insurance crisis.

“The Legislature could certainly overreact,” said Hebert, D-Jeanerette, a candidate for the state Senate.

“But I’ll tell you this: It’s 18 months after the storms and the Legislature has yet to have a serious discussion and debate about insurance. That’s frightening, and the voters are going to hold us to account for that.”

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