Thursday, July 25, 2024

What Louisiana governor candidates want to do about soaring property insurance rate

by BIZ Magazine

By Julie O’Donoghue, Louisiana Illuminator

One of the most pressing issues Louisiana faces is skyrocketing property insurance rates, including those for homeowners, businesses and vehicle owners.

Insurance providers have pulled out of the state and those that remain are raising premiums after seeing numerous hurricanes hit the Gulf Coast since 2020. Florida and California are also struggling to keep companies writing policies in their states amid the threat of climate change. 

The six major candidates running for Louisiana governor will have to come up with a way to keep coverage as affordable as possible if elected. Many are open to reducing insurance industry regulations as a way to lure more companies back to the state, but most said they won’t completely do away with restrictions. 

“I would not support the wild, wild west,” said Stephen Waguespack, a Republican candidate and former top business lobbyist.

Most candidates have said they would call a special session to deal with rising insurance costs, though Treasurer John Schroder and Attorney General Jeff Landry, both Republicans, said they would want a firm plan for policy changes before agreeing to convene lawmakers.

“I want to ensure that if we are going  to call a special session that the Insurance Commissioner has presented us with a package of bills that he believes will affect the market,” Landry wrote in a statement. 

Five of the six candidates agreed to be interviewed by the Illuminator about their property insurance plans. Landry declined to speak through a phone interview, but answered questions through an email.

Here are their answers: 

Allowing insurance companies to raise rates more often 

Louisiana’s Insurance Commissioner-elect Tim Temple intends to remove a restriction imposed on insurance providers that prohibits them from raising rates more than once per year. Most of the governor candidates also said they are open to this change.

State Sen. Sharon Hewitt, R-Slidell, said she supports this approach because she believes it will make Louisiana attractive to more insurance companies, and increased competition would ultimately keep premiums lower for residents.

Waguespack also believes allowing companies to raise rates more frequently could actually help keep rates lower over the long term.

Insurance companies have an easier time predicting risk on a shorter time frame. If the companies can reassess their exposure every few months, they may end up enacting smaller rate increases than during an annual appraisal, which could be less accurate, Waguespack said. 

Former state transportation administrator Shawn Wilson, the only Democrat in the race, also said smaller increases in premiums throughout the year might “make more sense,” though he would want to “run the numbers” before officially endorsing it.

Political independent and trial attorney Hunter Lundy was the only candidate who was skeptical that rates should be raised more than once per year.

“I don’t necessarily agree with that, but we will have a conversation,” he said.

Landry declined to answer the question.

Reducing lawsuits against insurance companies 

All the Republican candidates except Landry blamed Louisiana’s “legal climate” — and so-called “billboard” attorneys — for driving up insurance costs. They said lawyers convince too many Louisiana residents to sue insurance companies over their payouts, which ends up raising insurance costs in the state.

Schroder characterized this approach as the “sue first and ask questions later” way of dealing with insurance disputes.

He, Hewitt and Waguespack would seek to change laws to make it more difficult for residents to bring lawsuits against insurance companies. 

“The bad faith claims process needs to be revised. People call an attorney first and then claims get delayed,” Waguespack said.

In his written answers to questions sent through an email, Landry did not mention the “legal climate” of the state. The attorney general has also received large donations from the “billboard” lawyer community.

Altering what insurance companies cover

Schroder said the state should also take a closer look at what insurance plans actually cover. For example, Schroder said it may not be necessary for all plans to protect land as well as the building on a particular plot because “total losses” of property are rare.

Lundy and Waguespack said Louisiana should refuse to do business with companies that “cherry pick” areas where they will write policies. In other words, companies should have to be willing to write policies in every parish – not just those that carry a lower risk for natural disasters.

Lundy also thinks the people forced to obtain their insurance coverage through Louisiana Citizens Property Insurance Corp. — the state’s insurer of last resort — should pay less than they are now. Currently, those enrolled in Citizens must, by state law, pay 10% above the market rate insurance for their government-backed coverage. Lundy said the mandated rate should be lowered. 

Wilson believes insurance companies should not be able to use a person’s credit score to raise car insurance premiums

Expanding fortified roof program 

Candidates were mixed on whether they would try to expand the state’s subsidized roof fortification program, which is scheduled to get underway next week.

Gov. John Bel Edwards and legislators set aside enough money for 3,000 households to get grants worth up to $10,000 for new, more secure roofs on their homes. The elected officials hope this will result in insurance costs going down for those folks. Their homes should be more resilient after the upgrade.

At least half of the new roofs have to go to people who hold Citizens policies, as an incentive to get private insurers to pick them up. 

Waguespack and Wilson said they would consider putting more money into the program if the first round of funding is successful. Schroder was more skeptical. 

“I’m happy to look at everything that works,” Schroder said, but “I don’t think it’s very practical for the governor to give everyone money to fortify their homes.”

Increasing the number of insurance adjusters

Waguespack said Louisiana also needs more insurance adjusters in order to speed up the process for payouts from claims.

If elected governor, he would ask the Louisiana Board of Regents to create an insurance adjusters training program at one of the state’s college or universities. Currently, there is no certificate or degree program for insurance adjusters in the state.

Expanding the insurance company incentive fund

Most candidates said they would not be interested in putting more money into an incentive fund set up to lure more insurance companies back to the state. Lawmakers agreed to put $45 million into the account earlier this year.

“We’ve done about all the good that we can do on that program,” Hewitt said.

“The jury is out about whether the incentive fund works or not,” Schroder said.

Only Lundy and Landry expressed any interest in putting more money into the fund in future years, and Landry said he would only consider it if lawmakers wanted to expand the operation.

“We need to focus on a permanent solution” to the insurance crisis, Landry said. “We won’t take it off the table, but we will require real results … if the legislature decides to add more money.” 

Advocating for reasonable flood insurance 

The future governor won’t have much control over the rates in the National Flood Insurance Program, but Landry, as attorney general, has already sued the federal government over those surging costs. He hopes the legal action will lower rates for Louisiana households who face premium increases averaging 136% over the next few years.

“It is unfortunate that it had come to this; but after years of trying to negotiate, our only choice was to sue FEMA for relief or stand back and watch as our citizens hand over the keys to their homes and small businesses,” Landry said.

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