Clarity Act shields insurance company rate, premium details

After unanimous approval in both houses of the Legislature, Gov. Bobby Jindal on June 4 signed a bill to add transparency to insurance rate-setting, but the law includes a provision that shields individual company information from public view.
Rep. Chris Leopold, R-Belle Chasse, sponsor of the Property Insurance Clarity Act, said the legislation makes it easier to access information that the commissioner of insurance has assimilated, but which often takes a public records request to obtain.
“This bill takes away the need to submit public records requests and makes the information easier to find and understand,” Leopold said. He hopes the bill will lead to greater transparency but emphasized that “it is not necessarily intended to lower rates.”
The bill was crafted to mirror legislation passed in Alabama. After a two-year battle, the Alabama Property Insurance Clarity Act was passed in 2012 and became a law last year requiring the posting of premiums paid and losses incurred. A grassroots movement insisted insurance rates in coastal Alabama were subsidizing rates in other areas of the state with what they said was unjustifiable claims of higher risks from named storms.
The legislation, now officially named Act 427, is effective Aug. 1 and requires that insurance companies writing homeowner’s policies annually submit data on their total direct incurred losses, number of policies in force, and direct earned premiums by zip code and parish for the prior calendar year and back through 2004.
The commissioner must tally the data and publish yearly totals by zip code and parish on the department’s website and electronically publish a general description of the ratemaking methodology insurance companies are allowed to use in establishing rates.
The commissioner may issue rules and regulations to implement the act.
Rep. Joe Harrison, R-Gray, a co-sponsor of the bill, called this a first step in “trying to change 50 years of bad politics” and provide accountability in explaining how rates are set.
“This is a step in the right direction but it is not a solution to the problem” of complete transparency or of high rates, Harrison said. “We have to chip away a piece at a time to get what we need. It took a lot to get here.”
Harrison acknowledged that the bill, as written with insurance company documents shielded from public view, requires the public to trust the Department of Insurance to compile the information truthfully.
“They gave us their word that this is what they are going to do,” Harrison said of the insurance commissioner and people from his department.
Any company that fails to comply with requirements of the act will be subject to penalties. The law provides for a sunset of May 1, 2017, when it will expire.
“We will be back at the sunset and reassess the bill and tweak it further,” Leopold said. “We are getting there. If we see changes need to be made we will make them.”
Insurance Commissioner Jim Donelon refrained from supporting or opposing the bill as it made its way through the legislature. Leopold expressed his appreciation that the commissioner did not oppose the bill as well as the governor signing it.
The bill was not designed to curtail competition, but rather to encourage it, which is the best way to obtain lower rates for consumers, Leopold said. He credited the assistance of New Orleans area consumer advocates Tonia Pence and Angele Kimble-Rogers for getting the legislation moving.
Leopold also thanked Harrison, Rep. Sam Jones, D-Franklin, Kirk Talbot, R-River Ridge and Walter Leger III, D-New Orleans, for their assistance in getting the legislation passed.
Harrison said Noble Ellington, Louisiana Department of Insurance chief deputy commissioner and a former member of both houses of the Legislature, was a major help in getting the legislation passed and in stifling opposition to the bill.
Donelon said the law will result in a one-time expenditure of about $72,000 associated with web programming and design to facilitate collection of the data and reporting it on the department website. He said the department will be able to absorb costs associated with proposed law within its existing resources.
Sen. Dan “Blade” Morrish, R-Jennings, Senate Insurance Committee chairman, suggested adding the sunset amendment to assess whether the public uses the information and to see if changes need to be made in the legislation after it expires in two years.
Opponents of the legislation from the insurance industry claim the information the legislation requires to be posted is not enough to give the big picture of how much money insurance companies make or lose on homeowner insurance policies in the state.
George Sutton of Farmers Bureau Insurance said, “I am terribly afraid the information being collected will further confuse the complicated process of rate-making.”