The headlines blared across newspapers and television stations last week. “State insurance leaders join forces on Catastrophe Reform Legislative Package,” penned the Lake Charles American Press. “An insurance reform package is working its way through the Louisiana Legislature,” the publicized TV station WDSU in New Orleans said. Similar reports fanned news media all over Louisiana.
So just what are these major new “catastrophic laws” that will get insurance claims resolved quickly and lower the outrageous rates the public is currently being charged? With few exceptions, it’s all window dressing. That’s right. Almost every proposal by members of the legislature could be implemented and made a requirement by a simple directive issued by the Department of Insurance.
If an insurance company is delaying the payment of claims or “lowballing” by not paying legitimate claims in full, the Insurance Department has plenty of authority to levy major fines or even revoke the charter of the company that continues to ignore these regulations.
Another supposed “catastrophic change” calls for raising the minimum capital and surplus requirement for existing insurance companies from $ 3 million to $ 5 million by the end-of-year 2026, and to $ 10 million by end-of-year 2031. Such higher requirements should not be necessary if the Insurance Department is properly examining insurance companies located in Louisiana.
There has been a woeful lack of reinsurance requirements for Louisiana insurance companies, all that should be set and required by the Insurance Department. Insurance companies are required to buy their own insurance in case they don’t have enough reserves to pay the claims of policyholders. That’s what reinsurance from other major companies that specialize in reinsurance is for.
The best example of a company being able to operate in Louisiana and not have adequate reinsurance is the creation by the Insurance Department of Citizens Property Insurance Corporation. This is the company that US Senator John Kennedy, while serving as Louisiana state treasurer, called the biggest financial disaster in the state’s history. Citizens has been a calamity from the get-go, and has cost Louisiana taxpayers almost two billion dollars. It had almost no reinsurance. So if Louisiana insurance companies are going broke, the regulators have been negligent in not properly requiring enough reinsurance.
Instead of clamoring for unneeded new authority to increase oversight, and additional requirements on the insurance industry, the legislature should take a closer look at why these same requirements are not being enforced. Now if most of these proposed new “catastrophic laws” are unnecessary, just what should the legislature be requiring?
First, as Senator Kennedy has suggested, abolish the dysfunctional Citizens Property Insurance Corporation. The company has been mismanaged, and has faced one controversy after the other going back to its inception.
Second, pass legislation requiring the governor and the insurance commissioner to meet with other state officials in surrounding southern states to form a joint catastrophic insurance pool. Recent hurricanes in south Louisiana show dramatically how the state is just too small to go it alone when it comes to dealing with hurricane related insurance issues. These deep southern states need to create a comprehensive response mechanism for mega-catastrophes. There is ample evidence that such a program is both necessary and critical to any affordable insurance solution in Louisiana.
Third, Louisiana needs more than passive regulation. Proper regulation touches every single citizen. Following the recent spat of hurricane destruction, thousands of people could lose their homes due to the uncertainties of their insurance. There is a need for an aggressive, well-informed vocal advocate. A number of states have an insurance consumer advocate located under the governor’s office. An insurance commissioner, who receives political contributions from the insurance industry, is not the person to supposedly be looking out for policyholders. It’s the proverbial fox guarding the house. Better protection needs to be afforded to all insurance policy holders.
What’s the old Confucius saying? Needing insurance is like needing a parachute. If it isn’t there the first time, chances are you won’t need it again. It’s crunch time to put laws on the books that have some teeth and that can really protect policyholders in Louisiana.
Peace and Justice
Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide. You can read all his past columns and see continuing updates at http: // www.jimbrownusa.com. Readers can also review books by Jim Brown and many others he has published by going to http: // www. thelisburnpress.com.