Big changes coming for Louisiana’s insurance crisis, new commissioner says

Some of the proposals are already underway, while others will need the approval of the Legislature this spring to take effect. All together, the plan represents a broad effort to cut back on regulations and make the state's insurance market friendlier to companies, in the hopes of attracting more competitors and eventually lowering rates.

"Louisiana has a very heavy-handed regulatory reputation," said Temple, a Republican former insurance executive who took office in January after running unopposed. "We're changing that."

Temple's plans, outlined during a news conference Monday and at a speech before business executives last week, are likely to spark a contentious debate in the legislative session that begins next month. The Republican supermajority will need to grapple with an insurance crisis that has weighed on their constituents, while consumer-advocacy groups are likely to pan any moves to cut back regulations as a wish-list for the industry that will bring higher costs and less coverage.

The depth of the crisis isn't up for debate. After devastating hurricanes in 2020 and 2021, 12 insurance companies went belly-up, a host of insurers fled Louisiana and homeowners complained of soaring premiums for coverage.

The rolls of Citizens, the state-run insurer of last resort which by rule must charge more than the private market, have grown by 94,842 policies since Ida, a 244% jump. And while data isn't available for the private market, the average annual cost of a Citizens policy has risen to $4,600, up nearly $3,000 over the same period.

While Citizens' rolls saw a slight dip last fall, overall its policy count rose by 731 from 2023 to 2024. It saw large rate increases in 2023 and a smaller one this year.

Temple is seeking to change the office's approach after 18 years under fellow Republican Jim Donelon, who retired. Most of the changes are aimed at making insurance companies' lives easier so they'll be more willing to do business in the state.

Temple is pushing for an end to Louisiana's "three-year rule," which bans insurers from dropping customers if they had been with the insurer for three years. Hailed by Donelon as a consumer protection, the rule drew the ire of the insurance industry for being bad for business and Temple said he is not aware of another state that has such a requirement.

He has already lifted profit caps on insurance companies, allowing them to collect as much profit as they want. Donelon's office limited the profits a regulated insurer could make each year, but Temple said the policy is a barrier to entry for new insurers. He argued that customers can choose not to do business with a company charging too much.

Temple praised the Legislature's decision last year to allow companies to raise rates more than once a year. He plans to allow companies to self-report "minor" violations and avoid fines from the department, as long as the violation didn't harm a consumer.

He also wants to end department policy that bars companies from filing for new rates — including rate increases — without prior approval. And he said he intends to push for legislation to "rebalance" the legal system to bar what he called frivolous litigation against insurers.

He said last week he intends to "clarify" an order from Donelon last year that required insurers to pay an advance of three months of living expenses to customers who sustained a total loss and whose policy covers alternative living expenses, like a hotel stay. It was not immediately clear what Temple's clarification will do.

"Insurance is a free market," Temple said. "The legislation we're bringing...it's not experimental."

While overall the proposed rules aim at reducing regulation, Temple suggested he'll take aim at "thinly capitalized" insurers who write cheap insurance, sometimes by taking huge batches of policies from Citizens. He said he will analyze the re-insurance agreements held by the companies to make sure they have enough protection in case a storm hits.

A series by the Times-Picayune and the Advocate found that in recent years, failed insurers — many of them smaller companies that entered the market after Hurricane Katrina — made a host of questionable decisions. Those include taking on big batches of policies from Citizens, underpricing their products, concentrating their risk in a few parishes and shuffling millions to less-regulated affiliates.

Taxpayers are on the hook to pay upwards of $1 billion to pick up the tab for the claims the failed companies couldn't pay.

Ben Riggs, executive director of the advocacy group Real Reform Louisiana, cited the series by the Times-Picayune and The Advocate that found the failed insurers sent hundreds of millions of dollars to less-regulated affiliates, saying Temple did not propose "a single reform that strengthens protections for Louisiana families."

"Commissioner Temple continues to blame the consumer who asserts their claim instead of the insurer who fails to honor their contract with the policyholder," Riggs said in a statement, "His focus is on the same old industry-backed proposals that further stack the deck in favor of big insurance companies at the consumer's expense."

After dizzying rate hikes and an exodus of dozens of insurance companies, Louisiana's market has stabilized somewhat in the past year. But rates soared in 2023 and have remained high.

Under Temple, a grant program that has been hailed as a way to drive down risk — and therefore rates — appears likely to continue.

The fortified roof program, which gives up to $10,000 to homeowners who put a fortified roof on their home, may get $15 million more this year.

Temple said he supports the program and that he's confident the Legislature will support the funding, which would be enough for another 1,500 homeowners.

Temple also said he plans to eventually levy a fee on insurers and others regulated by the department to set up a dedicated funding stream for the program, similar to what Alabama does. He said he hopes Louisiana will also experience a rush to build fortified roofs outside of the subsidy, similar to what Alabama saw.

Several insurers offer discounts to homeowners who have fortified roofs; some of them offer 20% or more off their premium.

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