Senators to hear insurance transparency

Louisiana homeowners are one step closer to finding out how their insurance premiums compare to losses incurred by insurance companies.
The Property Insurance Clarity Act, HB 909, has cleared the Louisiana House of Representatives with unanimous approval and is scheduled for a hearing in the Senate Insurance Committee Wednesday.
The bill requires insurance companies provide data to the state Department of Insurance on homeowner insurance losses and premiums by zip code and parish.
Rep. Chris Leopold, R-Belle Chasse, sponsor of the bill, said it provides transparency to the rate-setting process.
At this point, as the bill goes to the Senate, “there does not appear to be any opposition.” Leopold said.
Senate Insurance Committee chairman Dan “Blade” Morrish, R-Jennings, said he will examine the bill closely today, but said he is familiar with the bill.
“In general, I support (Leopold’s) bill,” Morrish said. “It will give some of my colleagues and constituents access to information in one place.”
While bill sponsors hail the bill as a victory for transparency and clarity, others say that it will do the opposite and muddy the waters with incomplete information.
The Independent Insurance Agents and Brokers of Louisiana May legislative update sent to its members said it opposes HB 909.
Jeff Albright, chief executive officer of the agency, clarified the group’s position by saying it is not “actively opposing” the legislation, but it offered an opinion to its members. He said the group has not opposed the legislation.
“The bill is well-intentioned and sounds great,” Albright said. “But, it will not provide clarity.”
Losses are “a very small part of what goes into making homeowners premiums,” Albright said.
The bill does not include operating expenses, the cost of re-insurance and provisions for catastrophic modeling, Albright said.
The bill would lead to incomplete information, confusion and frustration, Albright said.
All the information regarding the cost of doing business in the state is used in totality by professionals known as actuaries in the department of insurance, Albright said.
Commissioner of Insurance James Donelon said the information is available in different formats.
Leopold said the bill keeps people from having to dig for information after filing a public record request.
“Why not put it in a format that is user friendly and easily accessible?” Leopold asked.
Leopold and other bill sponsors are well-intentioned, but the result of their bill will not accomplish what they set out to do, get clarity in a complicated process, Albright said.
The House Insurance Committee passed the bill 7-3 on April 23.
It sailed through the House and Governmental Affairs Committee with a 6-0 vote on April 29. It passed the full House, without opposition, 88-0 on May 7.
Leopold said Rep. Joe Harrison, R- Gray, worked on getting the bill passed as a co-sponsor.
In addition to Harrison’s support and work, Leopold said others helped in getting the bill through, but especially credited representatives Kirk Talbot, R-River Ridge, and Walt Leger III, D-New Orleans.
Morrish said he knows, and is friends with, the Alabama legislator who sponsored a similar bill two years ago.
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 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.
Donelon said earlier this year that 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 reserves, or purchase reinsurance, to keep solvent after a catastrophic storm like Katrina or Sandy.
Donelon estimated implementing the bill’s requirements would carry an initial cost of about $72,000, which could be accommodated in the department’s budget. The cost to insurance companies would be minimal, he said.
The commissioner said he will refrain from opposing or supporting the bill.
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. Without the bill an uninformed public is left taking the word of insurance companies and regulators, he said.