La. Auditor Suspects Illegal Insurance Rate Fixing at Citizens

January 30, 2008

Louisiana’s legislative auditor said Jan. 28 he suspects illegal price-fixing has occurred at the state’s taxpayer-backed property insurance company, though he told a legislative panel that he has no proof.

Steve Theriot told the Senate Insurance Committee that he believes Louisiana Citizens Property Insurance Corp.’s rates were illegally lowered in certain parts of the state, in a scheme to help private insurance firms dump high-risk properties. Theriot said he uncovered the plot while auditing the state Department of Insurance, then shared his information about possible wrongdoing with prosecutors in East Baton Rouge and Jefferson parishes.

Insurance Commissioner Jim Donelon then told the committee that Theriot was completely wrong.

“There is no evidence. There is no price-fixing going on. It can’t be done,” Donelon said.

By law, Metairie-based Citizens’ rates must be higher than private firms, except in parishes where no private firms are writing policies.

Theriot said he believes Citizens’ rates were artificially lowered in a scheme to help private insurers avoid paying big claims.

He said Citizens’ policy rates were lowered in areas at the greatest risk of damage. Theriot said such a scheme would have helped private firms because homeowners in those high-risk areas would be attracted to Citizens’ lower rates – meaning Citizens would be left insuring the highest-risk properties while private firms wrote policies for safer properties.

Monday’s dispute was the latest in a string of arguments between Donelon and Theriot, who have been at odds over Theriot’s attempts to get access to Department of Insurance internal e-mails, for an audit of the agency. Donelon has handed over 25,000 e-mails but refuses to release others, citing reasons including attorney-client privilege, health privacy laws and proprietary business secrets.

The e-mail dispute has landed in a Baton Rouge court, after Donelon fought a subpoena to hand over the e-mails. No court date has been set for that suit.

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