Louisiana Commissioner Continues Push for Market-based Reforms
As chair of the National Association of Insurance Commissioners’ Surplus Lines Task Force, Louisiana Com-missioner of Insurance Jim Donelon wants to be “on the cutting edge of national reform of the state- based regulatory system.”
On a national level, he’s working with the NAIC on federal legislation to reform the surplus lines tax collection and payment “nightmare.” On the state level he’s aiming for reforms to the regulatory system that will enable Louisiana to offer reciprocity to other states in such areas as in producer and company licensing, and to allow insurers more form and rating flexibility.
He wants to do these things, Donelon told members of the Louisiana Surplus Lines Association at the organization’s annual meeting, “because it’s the right thing to do. It helps our consumers by making us more user friendly for companies to come do business in our state. But it’s also a way of fending off the growing cry on the congressional level for federal regulation of insurance. … To the extent that we can make our procedures and processes more uniform, more user friendly, we fend off that growing momentum for federal regulation.”
Thwarting that momentum is the aim of several bills he’s presented to the state legislature during the session that began March 31. One would make Louisiana the 32nd state to join the interstate compact that allows for companies to file policy forms in one location overseen by the NAIC. “Through that compact and its implementation we demonstrate to Congress that we are committed to speed to market” and to making it easier for companies to do business in each of the 50 state jurisdictions, Donelon said.
Another bill proposes a rewrite of the state’s producer licensing law to upgrade the current statute to the national standard. The bill is another “effort to fend off federal legislation that the ‘Big I’ is now proposing [that would] create a dual system of licensing agents on a national basis,” he said.
Donelon said he would also like to see reform of the state’s statutory deposit law in order to make it easier for new companies to enter the state. “I’d like to get the unnecessary obstructions out of the way and make it easier for everybody,” big and small, “to access our market and start writing” business.
33 Bills
Donelon sent a package of 33 bills to lawmakers this year.
Among them is one that would revise Louisiana statute to allow companies to offer zone deductibles. He told Insurance Journal it’s one of his priority bills.
Currently insurance companies can change or increase deductibles only to their statewide book of business, Donelon explained. “If they change it they have to change it across the board.”
Some companies, he said, seek to offer coastal deductibles that would differ from deductibles in the northern part of the state. Donelon said a similar bill was included in the department’s legislative package last year it was lost “on the last day when the legislature just spit the bit on insurance; they’d had had their fill. They’d done the rating commission, they’d done the incentive program, they had preserved the building code by one vote … in the house. They had done all the heavy lifting on insurance that they wanted to do, so they said ‘enough.'”
Donelon said he’s backing the bill “not because I want to force consumers to take higher deductibles, but … when they take a higher deductible they get a lower premium.” He said the idea is that by offering companies “more flexibility we will keep them in market and attract others to the market who can underwrite their book of business with that flexibility. That truly is my number one priority for this session.”
Success Has Been Noted
Donelon said Louisiana has been successful with its market-based reforms and that the success has been noted worldwide. He said changes such as getting rid of the state insurance rating commission and implementing a strong statewide building code have been important both nationally and internationally “as a signal for where we are in Louisiana compared to where we’ve been.”
He said the Insure Louisiana Incentive Program, has worked beyond his expectations. While only about $40 million of the original $100 million set aside by the legislature for grants to companies willing to insure homeowners properties in South Louisiana and take policies out of the Citizens book of business has been approved for distribution to approved companies, more than a dozen new companies, both in and out of the program, have come into the state since the program’s inception.
Donelon gave credit to the surplus lines industry for doing its job on the commercial property side of the spectrum. Commercial property renewals are running about 25 to 30 percent lower than they were a year ago, Donelon said. In addition, properties that faced 5 percent named storm deductibles last year are renewing for deductibles of 2 or 3 percent.
“As our market comes back and we continue to do the right thing in the legislature. … As we are blessed by hurricane seasons like we’ve had the last two years, we will see the return on the homeowners side that we are seeing on the commercial side,” Donelon said.