Louisiana Governor Kathleen Babineaux Blanco and state Commissioner of Insurance Jim Donelon on April 11 unveiled a joint legislative package to attract new insurers to the state, drive down rates and protect consumers, the governor’s office announced.
“While Louisiana is on the right road to recovery, we all know that journey will be short-lived if we do not have insurance to protect our new investments,” Governor Blanco said in announcing the proposal. “Property insurability is inextricably linked to the future of our state. Our legislative package is designed to balance the need to create a competitive regulatory environment while ensuring that our citizens have adequate consumer protections and can realize a benefit from strengthening their property. Increased competition in our insurance market will increase availability and affordability.”
The package is a bi-partisan approach designed to create a competitive regulatory environment while ensuring affordable and adequate consumer protections and allow consumers to benefit from personal investments that strengthen their property, the announcement stated.
The proposal includes:
-Consumer Bill of Rights – This legislation will clearly define the rights of consumers in their business transactions with insurance companies.
-Premium Reductions for Retrofitting – This puts an expectation on the insurance company to extend a benefit to the policyholder for reducing their risk.
-Regional Deductible Ranges – Currently, if an insurer needs to raise deductibles to manage their risk in one part of the state, they must apply those deductibles statewide. This statutory change will allow insurance companies to apply different deductible ranges across the state to accommodate differences in risk.
-Depopulate Citizens by Competitive Bid – This allows LA Citizens to bundle its policies for sale to private insurers, giving insurance companies that want to enter the Louisiana market or expand their Louisiana business an opportunity to bid on an existing book of business.
-Insurance Capital and Surplus Match Incentive – This proposal creates an incentive program for property insurance companies. If a qualified insurer commits new capital to write property insurance policies in Louisiana, and agrees to take policies out of La. Citizens, they would receive a grant matching their capital investment.
The Property Casualty Insurers Association of America (PCI) released a statement expressing support for the plan.
“The members of the Property Casualty Insurers Association of America (PCI) share Gov. Kathleen Blanco’s and Insurance Commissioner Jim Donelon’s commitment to improving the state’s insurance marketplace, attracting new insurers and protecting consumers,” stated Greg LaCost, assistant vice president and regional manager for PCI.
“We are supportive of many of the elements contained in the package and encourage the Legislature to seriously consider those elements that support the creation of a more competitive regulatory environment. Attracting new capital to the property insurance market is a key component in achieving success. By enacting greater regulatory flexibility, eliminating the rating commission and streamlining the regulatory process, Louisiana will be well on its way.
“Specifically PCI supports replacing the Louisiana Insurance Rating Commission with a more competition-based regulatory system such as a ‘file and use’ rating system. Louisiana is the only state in the nation that still has a politically appointed rating commission with prior approval over insurance rates. We also support the governor’s proposal that would establish regional deductible ranges. Currently, insurance companies must apply deductible standards uniformly across the state, which creates a constraint since different regions of the state have different risk exposures.
“To help consumers protect their property we also support the establishment of a comprehensive hurricane damage mitigation program, which would create tax incentives for home and business owners who retrofit existing buildings to meet statewide building code standards.
“We also would support the requirement that carriers use actuarial data to reduce premiums for homes that are built stronger and safer. We will oppose efforts to use artificial and nonactuarial percentages as discounts however. If such happens, other consumers will end up subsidizing those new homes for as long as the new law exists.”
Louisiana’s legislative session begins April 30.
Sources: La. Governor’s Office, PCI
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