Citizens considers changes

The state property insurer of last resort’s board will meet Tuesday to discuss whether to begin issuing its own policies and handling claims that don’t involve catastrophes or continuing to contract out that work.

Taking that work in-house would require adding 18 to 22 workers, but the moves could save Louisiana Citizens Property Insurance Corp. $7 million to $10 million a year, Chief Operating Officer Vijay Ramachandran and Chief Claim Officer Quin Netzel have said.

Citizens now contracts with two private companies to handle all of the claims and policies issued, and those companies would continue to handle claims from hurricanes. However, the contractors have said Citizens’ staff may be oversimplifying the work involved in taking those tasks in-house.

This is the third time the board will have discussed the issue. At last month’s meeting, board members asked to see a more detailed presentation of the timeline for making the changes and hiring.

The board will also take a look at cutting insurance agents’ commissions for wind-and-hail-only policies, the insurance for hurricane damage. State law requires Citizens to offer the coverage, and Citizens began offering it after hurricanes Katrina and Rita, when some private insurers stopped writing the coverage in coastal areas.

However, Insurance Commissioner Jim Donelon has said he wants Citizens to get out of the wind-only business, the least profitable line of business with the largest potential claims. Private insurance companies have been able to sell split policies, dumping the hurricane risk on Citizens while hanging onto the money-making lines of business, such as fire and burglary protection. If Citizens doesn’t have enough money to pay its claims, taxpayers end up covering those costs.

Wind-only policies have grown from 0.5 percent of all policies in 2005 to 32.5 percent in 2012, when 36,562 of Citizens’ 112,423 policies were wind-only.

Citizens pays a 10 percent commission on the policies, and those commissions totaled $5.6 million this year.

However, Citizens Chief Executive Officer Richard Robertson said most of the other state-backed property insurers, including that only provide wind coverage, pay the same commission percentage.

“My recommendation is that we don’t change the commission, but obviously it’s up to the board to decide what it wants to do,” Robertson said.

At last month’s meeting, board member Sam Little said cutting the agents’ commissions might reduce the number of wind-only policies sold.