Mission Possible: Bringing Insurers Back to Louisiana
If the Professional Insurance Agents of Louisiana, the Independent Insurance Agents and Brokers of Louisiana (IIABL) and Louisiana’s insurance commissioner have their way, the state will soon be
flooded with insurers eager to sell policies there.
With that goal in mind, both IIABL and PIA Louisiana are launching public relations campaigns designed to let insurers know about changes that have been made in the state’s insurance laws and to spread the word that Louisiana is “more than just good food.”
According to Jody A. Miller, executive vice president of PIA Louisiana, the association has developed a presentation, A Better Louisiana, that it hopes will generate excitement about the business opportunities there. The group wants to get the message out that while Louisiana can’t be beat as far as food and fun are concerned, it’s also an excellent environment for business operations.
The plan is to attend national industry meetings, make the presentation and identify companies that show interest in the state. “The first one we’re scheduled to go to … is the NAII [National Association of Indepen-dent Insurers] meeting—their Executive Round-table, which is Jan. 25th through the 27th,” Miller said. “We’re actually sponsoring their breakfast on the 27th, which will allow us a little time before they start their general session to address the group.” She said over 100 company CEOs are expected to attend the Executive Roundtable.
Miller noted that after presenting A Better Louisiana at national conferences, such as the Executive Roundtable, and networking at the social events, the group plans to arrange one-on-one meetings with those companies interested in hearing more.
“We’re trying to get the word out to companies that don’t write currently in the state, to hopefully attract some here,” Miller said. “But we’re also using it to keep companies that are here informed, because a lot of times they don’t even know what all has happened during the [legislative] session.”
PIA Louisiana, which has around 300 agency members and about 150 insurance company members, has been working with the Louisiana Department of Insurance on the initiative. Miller said Insurance Commissioner Robert Wooley plans to attend PIA Louisiana’s first presentation at the Executive Roundtable.
Wooley has previously expressed his commitment to changing the regulatory environment in Louisiana to make the state more attractive to insurers, as well as to broadcasting the news that Louisiana is a good place in which to operate.
In an interview with Insurance Journal’s Dave Thomas, which appeared in the Nov. 3, 2003 issue of Insurance Journal-Texas/South Central, Wooley noted that “the number of companies writing homeowners insurance in Louisiana has dropped from over 80 since before Hurricane Andrew in 1992, to about 20 or so writing statewide today. Only about a dozen of those companies are actively writing any insurance below Interstate 10. That’s a serious concern of mine because there is no competition.”
Miller echoed Wooley’s comments about the homeowners market in her state. “What we would love to see, of course, is to have companies that may be at least willing to look at Louisiana again. We’ve lost a lot of companies. And we really need homeowners markets. … And so if we could just bring one company in that would write homeowners … we would consider this a success.”
She agreed that Louisiana’s coastal areas are a “big issue” with insurers. Miller explained however, that the group wants to get the word out to companies “that even though we have a lot of coastal area, the coastal area in Louisiana, most people don’t live there, like they do in Florida. … We don’t have half-million dollar homes [there] like they do in Florida or even in Mississippi.” She would like companies to see the state as more than just one big coastline and to recognize that the majority of the actual residential areas in the state are not concentrated along the coast.
Changing the system
Wooley’s challenge, he said, was “to change the current regulatory system that has been in place for over 50 years in Louisiana. When I first took over as commissioner three years ago, I surveyed companies who were no longer writing in the state to see what it would take to get them to write here again. Of the 108 survey responses sent back to me, without fail, the companies all listed the Louisiana Insurance Rating Commission [LIRC] as their main impediment to progress. That year, I was successful in persuading the legislature to approve a measure to scale back the powers of the LIRC but the governor vetoed that bill. Now, with the passage of legislation creating the flexible rating system [Flex Band] and the implementation of that law in January 2004, I expect a gradual strengthening of our homeowners market.”
The Flex Band rating system allows companies to modify their rates up or down by 10 percent without the approval of the LIRC as long as those rates can be actuarially justified. Then Governor Mike Foster allowed the measure to become law in June 2003, despite some reservations. Critics of SB 721, the bill establishing the Flex Band system, reportedly claimed the measure would allow insurers to raise rates in some areas by more than 10 percent, because that figure is a statewide threshold. Supporters see it, however, as an incentive to companies to bring their business back to the state.
A group effort
PIA Louisiana is not the only agents’ group actively working on trying to get companies excited about the state. In October 2003, the IIABL announced the creation of a Markets Task Force with the goal of bringing insurance company markets back to Louisiana. Like PIA Louisiana, the IIABL’s mission is to convince insurers that the business environment in Louisiana has changed for the better, and to expand the number of available insurance company markets.
Led by Marc Eagan of Eagan Insurance Agency in Metairie, the task force aims to tell insurance company executives about what is good and right with the Louisiana insurance market. “We’ve just completed a brochure—3,000 copies, 100 of which are a special edition, leather bound,” Eagan said. “They describe the changes in the Louisiana market over the years.” He explained that the brochure is “an executive summary, focusing on the auto, property and workers’ comp markets.”
The brochure is designed to let insurance executives know about the positive changes in the regulatory market, as well as the fact that Louisiana now has a cooperative rating commission and “a fast track for companies to get into the state,” Eagan said.
Commissioner Wooley is also participating in task force’s efforts, which include “road trips—10 to 15 this year—to set the stage for markets to come into the state in 2005,” Eagan said. He noted that with the possible softening of the market, companies may be looking for expansion, and “we want them to know about the opportunities to make money in Louisiana.”
IIABL has 360 agency members and a major charge of the task force is to bring new insurance company markets together with those members. Eagan said a survey of IIABL member agencies revealed that a lack of markets, particularly in the property area, was one of their greatest challenges. “As insurance companies come in to the state we’ll provide them with a distribution list of agents,” Eagan said. And the association plans to provide insurer contact information to its member agents, who will be armed with copies of the brochure. To keep its members up-to-date on the task force initiative, the IIABL is planning a series of town hall meetings around the state, mostly in the bigger cities. Egan said the intent is to keep it simple. There will be luncheon meetings with top agents in the various areas to let them know what is going on and what they can do to help.
According to Eagan, the association has no plans to limit its campaign to the standard markets. Noting that Louisiana is the third largest writer of surplus lines in the nation, Eagan said the group plans to bring its message to the “really good surplus lines companies,” as well.
Improved laws and legislation
Among the legal policies favorable to insurers that Louisiana’s advocates point out are:
• Lack of strict liability.
• A pro-defendant statute for “slip and fall” cases.
• Better liquor liability statute.
• No Pay/No Play: Non-insured injury party waives the first $10,000 in personal injury damages and $10,000 in property damages.
• Arson: An insurer may withhold payment of a first party property claim to an insured during the pendency of a formal investigation by the local or federal investigative authorities.
• Punitive Damages: Not provided as a matter of Louisiana law, except for in certain limited circumstances.
• Product Liability: Limits the liability of the manufactured/distributor of a product to certain prescribed standards of conduct.
• Med-Mal: Limits on medical malpractice claims.
Recent regulatory re-forms that make it easier for insurers to conduct business in Louisiana include:
• Flex Band: A flexible rating process for property and casualty insurance rates governed by the insurance commissioner.
• FAIR and Coastal Bill: Creation of the Louisiana Citizens Property Insurance Corporation, which operates the FAIR and Coastal plans. The bill revamped the current FAIR and Coastal plan to provide a mechanism to build reserves and earn interest on the balance tax-free. It also provided for provisions to raise the plan rates high enough so as to not hinder competition.
• Credit Scoring Legislation: Limits, but does not ban, the use of credit scoring in personal lines.
• Workers’ Comp File and Use: Allows a workers’ compensation insurer to provide notification of a rate revision if the rate request falls between -20 percent and +20 percent, provided that the request is actuarially justified. Rate becomes effective at least 90 days from receipt of notification.
• Regulation 78: Effective Jan. 1, 2003, certain insurance products may be submitted for certified approval, allowing affirmation by LDI within 15 days of acknowledged receipt. Insurers can “file and use” policy forms submitted for certain coverage types.
• Surplus Lines: HB 1476 reestablished the traditional standard that approved surplus lines insurers on the LDI “White List” and rated A.M. Best “B” or better do not have to file pretrial bonds.
An insurance chamber of commerce
For his part, in the November 2003 IJ interview Commissioner Wooley confirmed that he will be active in touting Louisiana’s virtues throughout the year. “In 2004, I will take our message of reform to insurers across the country,” Wooley said. “Traveling with me will be legislators, members of the governor’s staff and independent agents. We will act as a Chamber of Commerce for the Louisiana insurance industry, to let insurance companies know why Louisiana is now becoming a good place to do business.”