Insurance premium- to-loss info sought
A grassroots group is working to pass legislation so consumers can see a parish-by-parish comparison of how Louisiana homeowner insurance premiums relate to losses.
Louisiana chapters of Gulf Coast East Coast Coalition are following in the footsteps of the Alabama faith-based Homeowners Hurricane Insurance Initiative to reform how rates are calculated and demand transparency in the process.
The group is also working to pull together coastal states from Texas to Maine to form a self-insured pool of funds for wind and storm insurance that would replace third-party foreign-based “re-insurers” that insurers use to protect themselves from catastrophic losses.
Mike Schultz, of the Belle Chasse chapter of Gulf Coast East Coast Coalition, said the group is concentrating on legislation to help consumers become informed and hold regulators accountable.
An argument was made in Alabama that insurance companies used the threat of catastrophic losses from hurricanes as a bogeyman in order to move premium rates, and profits, upward — especially in coastal areas. After a two-year battle, the Alabama Property Insurance Clarity Act was passed in 2012 and became a law last year requiring the public posting of premiums paid and losses incurred.
The Homeowners Hurricane Insurance Initiative cultivated ties in the Bayou State to replicate their transparency campaign. A loose band of south Louisiana citizens have organized and are attempting, with the help of legislators, to craft similar legislation in Louisiana.
The three state lawmakers from this area, representatives Sam Jones, D-Franklin, and Joe Harrison, R-Gray, along with Sen Brett Allain, R-Franklin, agree that transparency from insurance companies is a concept they could support.
Harrison said, “This is a discussion we need to have.”
Schultz said without transparency, an uninformed public is left taking the word of insurance companies and regulators regarding premiums and how they compare to risks.
“There is no reason not to have transparency in a regulated industry,” Schultz said. Eight or nine state representatives are committed to co-sponsoring a bill in the next session of the legislature to provide a means for Louisiana citizens to view the relationship between losses and revenues of insurance companies, he said.
Insurance Commissioner James Donelon said he met with some of the transparency advocates. Donelon said he looked at the Alabama Clarity Act but he needs to see proposed legislation before he can comment on how well, or if, it could work here.
He is keeping an open mind and an open door to the citizens, Donelon said.
Harrison said insurance companies use actuaries and catastrophic models to set complicated rates that are self-serving and guarantees them profitability, perhaps more than warranted.
Donelon did not share the representative’s assessment that the system works to favor excessive insurance profits. He said his department has data and “cat models” that are produced independent of the insurance companies and these provide a reliable and fair risk assessment.
Schultz said information would empower consumers with the ability to see what is really happening, Schultz said.
“We do not know what the data will show until we see it. But, I believe consumers have a right to see that data in a regulated industry,” Schultz said.
Alabama’s Clarity Act took more than two years to get passed with opposition along almost every step, Schultz said.
Schultz said this is a “toxic, hot-button issue” opposed by some in the insurance industry and that makes it difficult for legislators to sign on to a bill. He also thinks there is a lack of enthusiasm for the bill from state insurance regulators. Yet, he is encouraged by Donelon’s stated willingness to keep an open mind.
Rep. Chris Leopold, R-Belle Chasse, said he and other legislators are performing due-diligence and reviewing the possible content to include in a bill for this year’s legislative session. Organizers have no desire to keep insurance companies from being profitable, he said.
“Our intent is to accomplish two things,” Leopold said. “We want to equalize rates using models that are transparent while not limiting competition in the market place. … We want a better atmosphere … with fair rates, but we do not want to run insurance companies out of the state.”
Leopold said legislators are looking at the Alabama legislation and trying to determine its strengths and weaknesses. He said an author of a bill here has not been determined but it is likely that Rep. Kirk Talbot, R-River Ridge, who is on the Insurance Committee, will have a prominent role.
Schultz agreed that if risks from storms are overstated and premiums are higher in south Louisiana than the risk justifies, it could be a case of south Louisiana subsidizing premiums in north Louisiana, which could lead to opposition from legislators in north Louisiana. But he expects to see premiums lowered in all areas of the state if information becomes publicly available.
“We do not expect that to happen, but if it does we are prepared,” Schultz said of opposition from north Louisiana lawmakers. “To the contrary, we suspect that all areas of the state are paying more than what allows a reasonable profit for the insurance companies.”