Proposals to pause higher Citizens premiums, force hearings on insurer profits fail in Louisiana [The Advocate, Baton Rouge, La.]

Apr. 3—Louisiana lawmakers on Wednesday sidelined proposals to force public hearings on private home insurers' profits and pause the mandated higher premiums for customers of state-run Citizens Property Insurance Corp., rejecting bills pitched as consumer protections amid the state's insurance crisis.

The moves helped bring into focus the Republican-dominated Legislature's philosophy for tackling the insurance crisis. Lawmakers appear poised to pass several bills that make it easier for insurance companies to raise rates and drop customers. Their hope is that these steps will cause more companies to enter the market, and that the increased competition that will result will eventually lower rates.

A large swath of legislators from both parties in south Louisiana vowed to prioritize the state's insurance crisis when running for office last fall, and indeed, it has been a top issue in the legislative session that ends in June. Several bills pushed by Insurance Commissioner Tim Temple, a Republican who took office in January after running unopposed, would make life easier for insurance companies. They are sailing through the process.

But the hearing Wednesday made clear that some lawmakers are uneasy with the strategy, fearing that more people will be forced to pay higher premiums on Citizens in the coming year, and that insurance companies will be able to extract higher profits from customers.

"In the short term, it's going to be devastating for people below I-10," Rep. Matthew Willard said of Temple's package.

Willard, a New Orleans Democrat, proposed a bill that would pause for two years the mandate that Citizens customers pay 10% more than market rate. State officials have long supported the higher rates, the state-backed insurer of last resort, because they believe it's important to push policyholders back into the private market.

But with a lack of insurers writing policies in storm-prone south Louisiana, and the failure of 12 companies following hurricanes in 2020 and 2021, the rolls of Citizens have swelled. As of January, Citizens had more than 133,000 policies, an increase of nearly 250% since Hurricane Ida hit. The average cost of a premium, meanwhile, has skyrocketed by $2,800 a year, to $4,610.

Concerns have grown since Temple and Republican lawmakers appear poised to phase out the state's three-year rule, which has long prevented insurers who want to keep doing business in the state from dropping policyholders who have been customers for at least three years. The legislation would allow insurers to begin dropping up to 5% of their riskiest policies each year, and many of those customers are all but certain to end up on Citizens' rolls, at least in the short term.

Opponents of Willard's bill, including Temple's office, argued it would make the state less attractive to reinsurers and would encourage people to stay on Citizens instead of finding policies in the private market. Willard argued that there are no options in the private market.

"We do not want to encourage people to stay in Citizens," said Barrow Peacock, a top deputy to Temple and a former Republican state senator.

The panel also heard testimony on a bill by Rep. Joe Stagni, R-Kenner, to require the insurance department to hold a public hearing any time an insurance company makes a profit of more than 10%. Temple recently ended a longstanding rule at the department that capped profits at 10%; Stagni argued that policyholders should hear from insurers when they try to make significant profits.

"Most of the insurance reforms we have seen are reforms that in my view decrease our constituents' protections," Stagni said, adding that his bill was an exception to that rule.

Stagni deferred the bill without a vote because he knew it wouldn't pass.

Insurance Committee Chairman Gabe Firment, R-Pollock, argued that insurers have been taking a beating in the Louisiana market in recent years because of hurricanes, and that they're trying to claw their way back to profitability.

If Temple's package becomes law, insurers will soon be able to secure rate increases without getting prior approval from his department, drop some longtime policyholders and have more time to resolve claims with customers before they file suit.

Lawmakers will also decide how much money to put toward a widely hailed program to build stronger roofs in Louisiana. The program, which gives $10,000 grants to homeowners to offset the costs, is modeled after a similar program in Alabama that resulted in substantial discounts to thousands of homeowners.

Meanwhile, the crisis in Louisiana, where rates have spiraled and insurers have fled, shows little sign of abating. Ben Albright, head of the Independent Agents and Brokers of Louisiana, said at the hearing that rate increases are not subsiding.

"We are still seeing rate increases pretty consistently," he said.

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