A proposed law that would limit rate increases for Louisiana Citizens Property Insurance Corp. could make it harder to effectively manage the state-backed insurer of last resort, according to the company’s chief executive officer.
Senate Bill 19, authored by Sen. Brett Allain, R-Patterson, would prevent Citizens from increasing rates by more than 25 percent a year unless the House and Senate Insurance Committees approve. The law would allow the state insurance commissioner to phase in the rate increase over two to five years, if both committees approve.
The bill goes before the House Insurance Committee on Tuesday, Robertson said, and Citizens’ staff will be testifying.
“We’re hoping to get it modified so it doesn’t set us back a year or more,” Chief Executive Officer Richard Robertson said at Citizens’ board meeting Thursday.
Last year, Citizens increased the rates for its wind-and-hail-only policies, which basically cover hurricane damage, by an average of 58 percent statewide. But the rates in 14 coastal parishes doubled, and rates tripled in Cameron Parish.
Coastal homeowners, not to mention their elected officials, were outraged.
Allain said Thursday that Citizens slapped St. Mary Parish with a 171 percent rate increase last year, and Citizens’ board refused to reconsider the decision.
The bill is an attempt to add legislative oversight to an entity created by the Legislature, Allain said. The idea in creating Citizens was to make insurance more affordable, not so expensive that no one can afford it.
Allain said he has worked with Insurance Commissioner Jim Donelon and members of the insurance industry in an effort to come up with an acceptable law.
Although insurance industry groups, including agents, are fighting the bill, Allain said he thinks he has addressed Donelon’s concerns.
Allain said he is willing to discuss changes.
But if the industry and Citizens are going to make a fight out of the issue, Allain said he has no incentive to modify the bill.
Citizens began offering the wind-only coverage after hurricanes Katrina and Rita in 2005, when private insurers stopped covering those risks. But coming up with the correct pricing was difficult since few private insurance companies sold the coverage. Citizens ended up selling the coverage too cheaply. Last year, Donelon said some private insurers and their agents were dumping the hurricane risk on Citizens and keeping the more profitable lines of business for themselves.
The number of Citizens’ wind-only policies soared to more than 30,000 in 2012. Since the rate increase, the number of wind-only policies has dropped to around 27,000.
In other action, Robertson told board members this would be his last Citizens meeting. His contract ends June 1, and the next meeting is set for July 11. Robertson has headed Citizens for two years and eight months. Donelon has yet to name a replacement, although board member Sen. Blade Morrish, R-Jennings, has asked to be considered.
Citizens’ board also voted to move forward with negotiations for office space at the Galleria building in Metairie. The company’s lease is expiring at its current headquarters, 433 Metairie Road in Metairie.