La. Gov. Pitches $100M Insurance Plan

With Louisiana’s hurricane recovery stymied in part by skyrocketing property insurance rates, Gov. Kathleen Blanco has a plan to ease the problem: Offer insurance companies $100 million in incentives.

But in an election year, Blanco might struggle to persuade Louisiana lawmakers to hand taxpayer money over to insurers. Insurance firms are deeply unpopular in New Orleans and other coastal communities, because homeowners rates have jumped up to 100 percent since hurricanes Katrina and Rita struck in 2005.

“We’re desperate. We’re actually considering giving out money to insurance companies to get them here,” said Rep. Troy Hebert. “That’s how desperate we’ve become.”

Blanco’s goal: Lower rates by luring more companies to Louisiana and heightening competition. If the Legislature approves the plan, it would be the first time a state has offered grants to insurance companies in an effort to persuade them to write homeowners policies, according to the state insurance department.

Blanco was to introduce the idea to the state House and Senate on Monday, the start of a two-month legislative session that will also include proposals to ban cockfighting, raise school teachers’ salaries and force lawmakers to disclose their sources of income.

The Democratic governor got her insurance plan from Insurance Commissioner Jim Donelon, a Republican free-markets enthusiast who called the proposal essential to fixing the state’s insurance problem and spurring post-storm rebuilding and recovery.

“You can’t do rebuilding if you can’t get insurance for your home or business,” Donelon said.

Blanco and Donelon want to set up a fund with $100 million in state money, then invite insurance firms to apply for amounts ranging from $2 million to $10 million.

Qualified companies would match the state money, and 25 percent of their new policyholders would have to come from the high-risk homeowners now insured by the Louisiana Citizens Property Insurance, the state-backed “insurer of last resort.” A company would also be required to agree to insure homeowners for at least five years.

The plan is intended to reduce the number of properties now insured by Citizens, which writes policies for homeowners who can’t find insurance elsewhere. Before the 2005 storms, Citizens had 125,000 policies; it now has over 150,000, making it the state’s third-largest insurer.

As Citizens grows, so does the amount of risk the state-backed company carries if another hurricane hits Louisiana. Blanco said she considers the $100 million incentives idea a long-term way to lure more companies to Louisiana, thereby increasing competition, lowering rates and reducing the amount of Citizens’ risk.

“We just have to find ways to spread our risk, attract new companies – do that, and we’ll all be better off in the long haul,” she said.

A handful of lawmakers from both parties have expressed support.

“The business community feels very comfortable that that will help draw insurers to Louisiana, and that will definitely lead to lower rates,” said Rep. Steve Scalise, a Republican from suburban New Orleans who often clashes with Blanco over her fiscal policies.

The plan has skeptics, though, including Hebert, a member of the House Insurance Committee. And in an election year, attacking the plan as an industry giveaway might be tempting for lawmakers, many of whom are running for re-election or for another elected post.

Senate President Don Hines noted that sending state money to insurers will also be a tough sell because the industry has had huge financial gains in recent years.

“There might be a little reluctance to go that route,” said Hines, D-Bunkie. “The insurance companies have had record profits.”

Unlike most lawmakers, Blanco is not running for office: she said in March that she won’t seek a second term because she wants to pull politics out of the hurricane recovery effort. Her role as lame duck has fueled speculation that her power over the Legislature has shrunk. But Hebert said Blanco might have been correct. It’s possible, Hebert said, that the governor will succeed in selling her insurance plan and other proposals because her opponents will have a hard time arguing that she’s putting politics ahead of governance.

“It actually could work to her advantage,” said Hebert, D-Jeanerette. “Whether or not this administration is sharp enough to do it, I don’t know.”

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