The Louisiana Legislature begins its annual session this week, and insurance proposals will certainly be on the legislative front burner. The current Insurance Commissioner made a really insightful statement last week. “We are currently in an insurance crisis,” duh, you think? An insurance crisis that has been going on in Louisiana for over fifteen years, almost as long as Rip Van Winkle has been asleep, and it seems the insurance department and legislature have woken up to the truth.
One of the proposals is to pour more state tax dollars into an incentive fund to attract more insurance companies to the state. When asked about this idea, our US Senator John Kennedy’s response was: “We tried it. It blew up in our faces.” The senator was right. In a special session a few months ago, the Legislature handed over $42 million to the Department of Insurance. Some companies applied for the funds, and most took tax dollars and then went belly-up. Now the department is asking for an additional $20 million for more incentives. So more. Expect bankruptcy.
Here is a partial list of proposed new laws. (Notice I didn’t say proposed new bill. A bill is something I get in the mail for purchasing services. Why do these insurance executives and lawmakers talk crap?)
Under another proposal, insurance companies may require policyholders to obtain a notarized sworn statement before making a claim. So a family gets hit by a hurricane with no local services available and looking to cover their heads. Before they even get basic help from their insurance company, they have to travel to who knows where to find a notary and find an attorney or someone else to prepare a sworn proof of loss form, hoping the post office doesn’t close. , send the form to the insurance company, and wait and wait to hear back. What a terrible piece of legislation, that is proposed to delay any payment to the company.
Then there is another attempt to shore up this state-run civil property insurance company. You’ll remember that Senator John Kennedy said Citizens was the worst, most mismanaged company in the state when he was state treasurer. The insurance department wants to prohibit any policyholder from accepting bad-faith penalties when citizens continue to ignore policyholders and fail to pay claims on time. Sen. Kennedy is right. Citizens have been a go-to disaster and should be abolished. It should tell us something that no other state has state-run companies like its citizens.
Policyholders should be wary when lawmakers say these proposed changes will prevent insurance rates from rising. Remember it was two years ago when the legislature approved so-called tort reform that the insurance commissioner promised would lower auto insurance rates by 25%. So what happened? Have you checked your policy recently? Instead of falling rates, big rate hikes happen. Legislators were sold a bill of goods and they bought it. Now policy holders are paying the price. A great value.
A few other proposals are being floated by insurance commissioners and legislators, but most of them are little more than a finger at the crumbling dyke. So are there any significant changes that can be made beyond praying for hurricanes? Yes, and I’ve listed several ideas in past columns. But the idea of single greatest import is to require the governor to form a joint insurance pool with the governors of other Gulf Coast states. Louisiana has huge weather exposure but is too small to go it alone.
None of this is basic or rocket science. It’s a matter of strength. And the governor must be involved. All but twelve states appoint insurance commissioners. So Congress will look to governors to aggressively pursue these important ideas. There are ways to solve this major insurance crisis. But it will take more focus and much stronger leadership.
Peace and justice