Proposal to lower Louisiana Citizens insurance rates narrowly fails in tied vote
8th April 2024 · 0 Comments
By Wesley Muller
Contributing Writer
(lailluminator.com) — A proposal to lower insurance rates for homeowners covered under the state-backed Louisiana Citizens Property Insurance Corp. was narrowly defeated last week in a tied committee vote.
House Bill 524, sponsored by Rep. Matthew Willard, D-New Orleans, stalled in the House Insurance Committee in a 9-9 vote. As one of the only proposals this session to provide direct relief to the homeowners most affected by the state’s insurance crisis, the bill would have reduced the Louisiana Citizens 10 percent premium surcharge to five percent for the next two years.
Louisiana Citizens is the state-backed insurer of last resort that homeowners turn to when they cannot obtain coverage from insurance companies on the private market. By design, Louisiana Citizens charges 10 percent above the most expensive policy in a given parish so as not to compete with the private market and to discourage homeowners from choosing Louisiana Citizens unless absolutely necessary.
Initially, Willard’s bill would have fully suspended the 10 percent premium surcharge. In an effort to try to win support from some Republicans, he agreed to an amendment that would have reduced the surcharge to 5 percent. However, it was still not enough to advance the measure out of committee.
Louisiana Insurance Commissioner Tim Temple, who used to own and operate the kinds of companies he now regulates, has pushed a package of industry-friendly bills to repeal many of the reforms Louisiana adopted decades ago to protect homeowners from bad faith practices by insurance companies. Temple has said those laws must be repealed in order to bring competition back to Louisiana.
So far, lawmakers have advanced those bills that will, among other things, remove caps on annual rate increases, enact automatic pre-approvals of insurance companies’ rate hikes, and allow for mass cancellations of policies across the state.
Some lawmakers mentioned this while debating a transparency proposal from Rep. Joe Stagni, R-Kenner, who said he believes some of Temple’s industry-backed bills will put homeowners “in serious jeopardy.” Stagni’s bill would have required the insurance commissioner to hold a public hearing before approving any insurance company rate increases with a target profit exceeding 10 percent. The public would not have any authority over the commissioner’s decisions, but public hearings would encourage the commissioner and insurance companies to be transparent about their reasons for rate hikes.
“We have gone through a lot of bills this session, and we’ve heard the term ‘insurance-industry friendly,’ but we haven’t heard the term ‘consumer-friendly’ a whole lot,” Rep. Chad Brown, D-Plaquemine, said.
Others on the committee claimed Stagni’s bill could harm consumers. Rep. Jack Gallé, R-Mandeville, said allowing the public to scrutinize a company’s profits could “inspire simple class envy.”
With dozens of insurance agents and company executives in attendance to oppose the bill, Stagni voluntarily deferred it without a vote.
When Willard presented his proposal, he pointed out that many homeowners currently cannot get any private companies to write policies on their homes and said he was concerned that Temple’s legislation package won’t provide any relief in the near future, if ever.
“I really hope and pray that it brings more companies to our state; I really do,” Willard said. “But from everyone I’ve talked to, it’s not going to happen overnight. It’s not going to happen in a year. It might not happen in two years.”
If insurance companies benefit from the new laws for two or three years before providing any relief to homeowners, Willard said the Legislature should consider providing at least some temporary relief to those homeowners currently forced to pay the higher premiums from Louisiana Citizens.
“Do we want to penalize them for staying on Citizens because the state failed to provide them with a competitive market?” Willard asked.
Some Republicans on the committee agreed with Willard’s reasoning. Rep. Brian Glorioso, R-Slidell, said the Legislature needs to provide some sort of safety net for homeowners “at least in the short term.” He said he couldn’t support Willard’s bill in its current form but would consider a similar alternative that is revenue neutral.
The initial version of the bill carried a fiscal note showing a cost of $25 million per year for the state. After amending the bill, lawmakers estimated the cost would be cut in half.
Joe Sciortino, chief financial officer of Louisiana Citizens, pointed out that the insurance carrier is supposed to be a last resort and temporary option. Having higher rates than the private market gives private insurers the ability to compete for those policies, he said.
“Any time you suppress our rates, you’re bringing us closer to the voluntary market and being in competition with the voluntary market,” Sciortino said. He added that it would likely cause an increase in reinsurance rates, the coverage insurance companies obtain to cover their risk.
Throughout the session, the obscure topic of reinsurance has become a frequent refrain during debates, and few have offered any thorough explanations as to why reinsurance is a problem. Willard expressed a hint of frustration with this.
“It’s like the reinsurance market is this big bad bogeyman, and the bogeyman does not want you to do anything that’s going to help people, and you got to do everything you can to help corporations,” Willard said.
The Louisiana Department of Insurance was firmly opposed to the idea. Deputy Insurance Commissioner Barrow Peacock, a former Republican state senator, argued that any suspension or reduction of the 10 percent premium surcharge would incentivize homeowners to stay on Louisiana Citizens.
Jeff Albright, a lobbyist with the Independent Insurance Agents & Brokers of Louisiana, said his organization has taken a neutral position on Willard’s bill.
“For those people who do not have another option, this bill makes total sense,” Albright said. “If they truly don’t have another option, it doesn’t necessarily make sense to charge them that extra 10 percent. The problem obviously is on the other side when you do have Citizens being competitive right now.”
Albright explained that Louisiana Citizens sometimes offers lower rates than some companies because of the lag time from when the market changes to when Citizens updates its rates. Any further reduction could discourage insurance companies from coming to the state, he said
Both Peacock and Albright said some homeowners are already choosing to stay with Louisiana Citizens despite lower rates being available from private companies because they like how responsive they are and how well they handle claims.
Peacock disagreed with Willard’s description of the 10 percent surcharge as a penalty and said it’s necessary to steer homeowners away from using Louisiana Citizens.
“In an American system of capitalism, the private market does better [than the government],” Peacock said.
This article originally published in the April 8, 2024 print edition of The Louisiana Weekly newspaper.
