Insurance market solutions remain elusive in House committee

(The Center Square) – Proposals involving surcharges by Louisiana’s insurer of last resort and insurance carriers expecting profit exceeding 10% have been deferred.

Lawmakers are grappling with insurance carriers leaving a state that is vulnerable to hurricanes, a primary driver on property rates.

The two bills in the Insurance Committee of the House of Representatives are in marked contrast to several bills passed by the Senate’s Insurance Committee last week. Those are championed by state Insurance Commissioner Tim Temple and seek a more free market view.

One of the bills considered by the committee on Wednesday was House Bill 524 by Rep. Matthew Willard, D-New Orleans. His initiative would have removed the 10% premium surcharge on policies administered by state’s insurer of last resort, the Louisiana Citizens Property Insurance Corporation. These surcharges are designed to compel property owners to find policies on the open market.

Rep. Joseph Stagni, R-Kenner, also voluntarily deferred his bill, House Bill 513. This proposal would have required the state insurance commissioner to conduct a financial analysis and hold a public hearing if a rate filing by an insurance carrier has a target rate of return or expected profit that exceeds 10%.

Willard said the market is not competitive. And without that, he said, “Many of our constituents can’t get a private company to write their policy. And because the state has failed to provide them with a competitive insurance market, they’re paying this 10% premium charge.”

Joe Sciortino, chief financial officer of Citizens, said the legislation would have a negative effect on the corporation’s ability to procure reinsurance. That means financial protection to insurance carriers. He also said one of the aspects that makes Louisiana attractive to reinsurance providers is lawmakers have never suppressed rates such as in Florida.

According to data from the Louisiana Department of Insurance, Citizens is the state’s fourth-largest carrier in terms of policies with $103 million in written premiums and has increased its premiums by 63% in 2023 due to rising reinsurance rates.

The cost of reinsurance, according to a report by investment banking group Jefferies, has increased 3% this year after a 37% hike in 2023.

Stagni told the committee the most recent campaign for he and all lawmakers was the insurance market.

He told the committee, “Some of the things that have happened so far will put our citizens, especially if you represent people below I-10 in serious jeopardy and it will hurt home ownership in the areas where I represent. I think a good faith effort should be placed in trying to get some transparency should be made in the process when you’ve lifted rate caps and an insurance company wants to receive more than a ten percent increase in profit.”

Twenty-nine entities filed cards in opposition to the bill, including State Farm and the state’s independent insurance agent association.

Rep. Jay Gallé, R-Mandeville, said while he understood what Stagni was trying to accomplish, he worried that there would be a chilling effect as the profits of insurance companies were placed under greater scrutiny.

The state’s vulnerability to hurricanes is a primary driver on property insurance rates, as the state has been hit by four since 2020. Three of those, h

Hurricanes Laura, Delta and Zeta made landfall in 2020. Citizens was created by the Legislature in 2004.

A 2023 survey by Louisiana State University’s Reilly Center for Media & Public Affairs found serious issues with the state’s property insurance market among the 509 Louisiana residents surveyed online. Seventeen percent of homeowners said their provider canceled their policy, while 19% tried to get a new policy and 55% of them had difficulty securing one.

Sixty-three percent of policyholders said their coverage costs increased in the past year, with 54% of those with flood insurance saying that their premiums increased.

The Legislature held a special session last year to help deal with the state’s property insurance market, but lawmakers avoided large-scale reforms. Instead, they opted for an incentive program that provides insurance companies grants ranging from $2 million to $10 million to write policies in the state.