Panel says insurer should not sell just wind-damage coverage
A Louisiana Citizens Property Insurance Corp. committee recommended Wednesday to drop the idea of selling only hurricane coverage, or wind-and-hail policies.
“For Citizens to narrow its focus to only handle wind seems to be counterproductive,” said Jeff Albright, chief executive officer of the Louisiana Independent Agents & Brokers of Louisiana and a member of Citizens’ special committee.
It wouldn’t matter whether Citizens’ wind-only coverage cost a little more than the coverage offered by private insurers, Albright said. Those companies would keep dumping that risk onto Citizens, the state’s insurer of last resort.
The only way to prevent that from happening would be to keep rates much higher than the market. That would create a political problem for Citizens because consumers, and their elected officials, would pressure Citizens to keep prices down, Albright said.
Citizens staff members have recommended the company get out of the business of selling wind-only policies.
Although the total number of Citizens’ policies has steadily fallen since the 2005 hurricanes, the number of wind-only policies has grown by roughly 10 percent in each of the past four years, Chief Operating Officer Vijay Ramachandran said.
That occurred until the second half of 2012, Chief Financial Officer Steve Cottrell said. The number of wind-only policies dropped from 37,500 as of June 1 to 31,500 in December.
Cottrell said the decrease is probably the result of Citizens’ decision to raise wind-only rates an average of 45.1 percent statewide.
But wind policies still make up around 30 percent of Citizens’ policies, he said.
Remaking the state-backed insurer was just one of the discussion topics at the committee meeting. The committee also touched on the ideas of:
- Calculating Citizens rates using the weighted average of the top five or 10 private carriers in a parish rather than the private company with the highest rates.
- Not allowing insurance agents to stop private insurers from taking over policies from Citizens.
Insurance Commissioner Jim Donelon said private companies requested 20,000 more policies than they received during the last time Citizens was trying to trim down its number of policyholders. However, insurance agents prevented those policies from being transferred.
The agents — except for those employed by State Farm, Allstate and Louisiana Farm Bureau — own the policies under state law, Donelon said. For State Farm, Allstate and Farm Bureau, the law makes the companies the owners of the policies instead of their agents.
- Offering legislation that would exempt Citizens from class-action lawsuits over taking too long to start the claims process or to pay claims. After hurricanes Katrina and Rita, policyholders filed a number of class-action lawsuits against Citizens. Those lawsuits cost Citizens some $165 million.
Citizens Chief Executive Officer Richard Roberts said the ideas were opportunities and challenges that could increase the insurer’s efficiency.
Donelon said the class-action protection bill offered during the last legislative session narrowly failed because it was retroactive and would have wiped out the ongoing class-actions.
The plaintiffs’ attorneys hired lobbyists and defeated the bill then, Donelon said, but the bill should easily pass this time.
The committee will meet again over the next few weeks to finalize its recommendations.