Insurance clarity bill passes in committee

A bill requiring insurance companies provide data on their losses and premiums by zip code and parish to the state Department of Insurance data, passed through the House Insurance Committee Wednesday, with a vote of 7-3, but it was not sent to the House floor as its author expected.
Rep. Chris Leopold, R-Belle Chasse, sponsor of HB 909, expected the bill to be scheduled on the House floor in the next two or three days. He learned this morning that it has been recommitted to the Committee on House and Governmental Affairs.
Rep. Joe Harrison, R-Gray, said sending a bill to the second committee is often a tactic to keep it off the floor. Harrison said he is “100 percent for the bill … so people can get clarity and make sure they are getting what they are supposed to.”
Leopold said, "We do not expect foul play in the bill being sent to the committee but we will keep our guard up.”
The bill is meant to add transparency, but opponents representing the insurance industry, said it would do the opposite. Opponents speaking to the committee include a former state insurance commissioner and former speaker of the house.
Former Commissioner of Insurance Robert Wooley said raw data on rates and losses do not paint a true picture.
“This act could create confusion rather than clarity,” Wooley warned committee members. “Before I became commissioner, I thought past losses played a bigger part in rates than they do … An attempt to form a correlation between past and future claims could be confusing.”
Leopold said opponents of the bill have known for months the bill was being formulated and have offered no ideas or amendments on how to make it better.
“If they do not think the bill creates clarity then they need to come up with some ideas, or offer amendments to the bill,” Leopold said. “If they have any suggestions they need to bring them to the table. So far they have brought nothing.”
Former Speaker of the House E.L. “Bubba” Henry said he represents State Farm Insurance Company in opposition to the bill. He said there was a consensus among those “knowledgeable about insurance” that the Leopold’s bill would lead to confusion rather than clarity.
If a citizen wants the information, they can file a public record request or they could call the insurance commissioner’s office and receive it, Henry said.
Commissioner of Insurance James Donelon said the information is available in different formats but would take some digging to locate.
Leopold said having to dig for information through a public record request does not qualify as being transparent.
“Why must someone go through the effort of a public record request? Why not put it in a format that is user friendly and easily accessible,” Leopold asked.
Donelon said he was asked to appear before the committee in opposition to the bill but declined. His only concern was the bill could result in confusion rather than clarity, he said. He will continue to refrain from opposing or supporting the bill, he said.
Two months ago, Donelon said the biggest driver to rates is not past losses but what insurers expect to lose in the future based on computer models that try to predict possible losses from future catastrophes. Those models are used to build enough reserves, or purchase reinsurance, to keep from going belly up after a catastrophic storm like Katrina or Sandy.
An argument was made in Alabama that insurance companies used the threat of catastrophic losses from hurricanes to move premium rates, and profits, upward — especially in coastal areas. After a two-year battle, the Alabama Property Insurance Clarity Act was passed in 2012 and became a law last year requiring the public posting of premiums paid and losses incurred
Donelon said the impression in Alabama that coastal areas were subsidizing other areas of the state was “mistaken.” The Alabama bill “led to a lot of discussion but not rate decreases,” he said.
Sam Jones, D-Franklin, said he is “absolutely for” Leopold’s bill, but is disappointed the commissioner has not come out in support of the bill.
“He needs to come out in support of the people,” Jones said. “He is against the people in his actions and inaction.”
Mike Schultz of the Belle Chasse chapter of Gulf Coast East Coast Coalition is one of the leaders of a grassroots movement to pass the legislation. He said the legislation will help consumers become informed and hold regulators accountable.
Schultz does not think the industry is as transparent to the average policy holder as Wooley portrayed. Without transparency, an uninformed public is left taking the word of insurance companies and regulators, he said.
“I believe consumers have a right to see that data in a regulated industry… There is no reason not to have transparency,” Schultz said.
Henry suggested the bill was unneeded but could be studied further.
Leopold disagreed.
“I don’t want to study an issue,” Leopold said. “It is time to take the test.”
“Our intent is to accomplish two things,” Leopold said two months ago. “We want to equalize rates using models that are transparent while not limiting competition in the market place. We want a better atmosphere with fair rates, but we do not want to run insurance companies out of the state.”
“The idea is to provide data to consumers to help them understand their property insurance premiums and to help determine if a proposed premium is in line,” Leopold said.
Donelon said implementing the bill’s requirements would carry an initial cost of about $72,000, which could be accommodated in the department’s budget. He said the cost to insurance companies would be minimal.