Since a succession of devastating storms ravaged Louisiana’s shore and upended the state’s insurance market, officials have attempted to right the ship by luring companies to write policies in the state with millions in incentive payments.
State officials, legislators, and consumer groups generally agree that the so-called Insure Louisiana Incentive Program is a good first step, but it is only a band-aid for an insurance landscape in chaos. A dozen insurers have gone bankrupt, leaving nearly 100,000 Louisiana residents with little choice but to rely on Citizens, the state’s insurer of last resort.
The rising frustrations of constituents navigating the resulting shambles have fueled lawmakers’ desire to find other remedies. When the Legislature reconvenes on April 10, industry interests and advocates appear to be bracing themselves for harsh battles about the best solutions.
“I think we’re at an inflection point, even more so than after Katrina,” said Kevin Cunningham, a lobbyist who represents insurance companies.
Officials are floating a slew of proposals, with more likely to surface as the session nears.
Some appear to have widespread support, such as a pair of bills aimed at strengthening roofs, which supporters claim will lower premiums. Another proposal would allow insurance companies to adjust their rates more frequently, which some argue would help those companies’ finances.
Others appear to be ready to disagree. For example, Insurance Commissioner James Donelon is supporting a plan fashioned after a Florida statute aimed at reducing a surge in insurance-related lawsuits in that state. Detractors in Florida and Louisiana have attacked the bill for making it more difficult and expensive for consumers to sue their insurers.
The insurance lobby, according to Ben Riggs, director of the advocacy group Real Reform, is “pushing Donelon to emulate Florida’s practices, which enable insurance companies mislead policyholders” with that measure. Before the statute was implemented, three-fourths of all insurance-related lawsuits in the United States were brought in Florida, and something had to be done to stem the tide.
STAFF PHOTO BY TRAVIS SPRADLING
Homeowners caught up in the market’s difficulties say the stakes are high for the session.
Joe Srour of Metairie ended up on Citizens’ rolls last year, roughly 18 months after a portion of a neighbor’s chimney flew off a roof during Hurricane Ida and tore shingles from Srour’s house.
“Do they have enough reinsurance? Do they cancel their reinsurance policies? Do they lower their standards? We don’t know that,” Srour said.
Roof grants
Legislators are rallying around a proposal pioneered in Alabama over a decade ago that allows citizens to build and upgrade their homes to withstand hurricanes. The Insurance Institute for Building Home Safety developed the Fortified building standard, which is meant to withstand wind speeds of up to 100 mph in some circumstances.
Rep. Mike Huval, R-Breaux Bridge, who chairs the House Insurance Committee, said he wants to file legislation to fund the grant program in Louisiana with $10 million. Huval authored the measure that established the program last year, but he claims it was enacted too late to be funded.
“It’s been proven through homes that were (retrofitted) in Alabama that with a Fortified roof, the damage from strong hurricane winds is about 70% less,” Huval said. “Basically, if you can keep the roof on top of a house, then you’re not going to have a lot of damage to the house.”
Over 34,000 Alabama houses have been built or upgraded to the Fortified standard in less than a decade. Nevertheless, with more than half of its inhabitants living along the ocean, Louisiana may have an even more difficult task ahead of it.
Huval stated that his plan will be similar to the features of Alabama’s program, which provides subsidies ranging from $2,000 to $10,000 to qualifying homeowners. Those who have reinforced roofs should get a discount on their insurance.
“I think there is such a concern for the high insurance rates in our state, that this is the solution,” he said.
Another bill, introduced by Rep. Gabriel Firment, R-Pollock, would force insurance companies to provide policyholders with the option of having their roofs repaired to strengthened standards if they experience storm damage – something that current plans do not necessarily cover.
Donelon has also asked lawmakers to put another $17 million from a surplus of unspent funds into LDI’s incentives pot — a move that some lawmakers say should be accompanied by steps that directly benefit policyholders, such as fortifying roofs, according to House Conservative Caucus Chair Rep. Jack McFarland.
“I’m not for giving more money (to the companies) unless we actually reform and change the way we manage our insurance,” said McFarland, R-Winnfield. “All of it needs to work together.”
Changing the rate filing period
Huval also stated that he intends to introduce legislation that would allow insurers to request rate modifications every six months rather than once a year. He believes the regulation will allow businesses more leeway if their financial situation changes unexpectedly.
“This would give the insurance companies the ability to adjust their rates at least every six months for their rate filing. We feel that if we could pass this bill, it would attract some additional insurance carriers to our state.”
The bill could change, he said.
Huval said it would be a small tradeoff for luring more insurers, which would result in better prices for consumers.
“It still has to be approved by the insurance commissioner,” Huval said. “It’s not a big difference in our minds, but to an insurance company, it gives them (another) opportunity to make a rate filing.”
A bill modeled after contentious Florida law
Donelon stated last week at a town hall meeting sponsored by The Advocate | The Times-Picayune that he is advocating for a law similar to the one just approved in Florida. The legislation has jumbled party loyalties in the Sunshine State: While business organizations and Gov. Ron DeSantis supported it, former President Donald Trump dubbed it “the greatest Insurance Fraud in the entire Country!”
According to a presentation outlining the Louisiana bill, it would end the practice of ordering insurers to pay attorney fees to policyholders who prove the company hasn’t paid claims quickly enough. It would also necessitate a judge’s approval for any attempt to seek so-called “bad faith” penalties from companies, which advocates like Real Reform see as an unnecessary roadblock for policyholders.
However, Donelon, who presided over the market crisis and recently announced his intention not to run for re-election this autumn, said that Louisiana’s measure would promote market parity with other states.
In contrast to Florida, Louisiana has not experienced an increase in the number of insurance cases in recent years. Nonetheless, Donelon hopes that the regulation will prevent a flood of prospective legal action, which he believes will drive away insurance firms.
“We’re trying to prevent Louisiana from becoming the next Florida,” Donelon said.
Firment, the north Louisiana legislator responsible for the roofing policy, has also introduced two other insurance proposals. One proposal would allow households to set up tax-free disaster savings accounts. The other recommends making “assignment of benefit” contracts illegal, which transfer the right to make claims from policyholders to other parties such as law firms.
In recent months, these agreements have come under attention as a Texas firm has been accused of engaging in a pattern of questionable behavior, often tied to the assignment of benefit contracts, in the aftermath of Hurricane Laura.
