Lawmakers pressure Donelon for assurances over incentive package for insurers
NEW ORLEANS (WVUE) - Insurance Commissioner Jim Donelon went before the Joint Legislative Budget Committee on Friday (Jan. 20) to push for a special session related to the insurance crisis.
Donelon wants the legislature to put $45 million in a fund to incentivize insurers to write policies in the state.
“We’re experiencing the worst homeowners market since Hurricane Katrina and Rita hit our state in 2005, eight insurers have failed, three of those domiciled in Louisiana,” Donelon said as he spoke on the House floor.
Since Hurricane Laura and Ida devastated different regions of the state some insurers have failed financially and some others have left the state. And Donelon says that could hurt people who have mortgages.
“People are literally going to lose their houses if we don’t have a special session, literally. They’re going to turn in the keys in because they have to have insurance according to their mortgage and they can’t afford it, can’t pay it,” he said.
The reduced number of insurers in the state has caused Louisiana Citizens, the state’s insurer of last resort to inherit 125,000 policyholders who had nowhere else to turn for coverage. This month a 63% rate hike went into effect for Citizens’ customers.
Donelon says seven insurers, the majority already in the state, reached out to the Department of Insurance expressing interest in writing new policies due to the expected incentives and he said three others want to take some of the policies from Citizens immediately.
But lawmakers including legislative leaders pushed for guarantees that the financial incentives will actually benefit policyholders and taxpayers as they questioned Donelon.
Rep. Clay Schexnayder, R-Gonzales, is a house speaker.
“You don’t have a letter saying, yes we’ll come in and we’ll do 50 policies or we’ll come in and do a hundred policies it’s a maybe?” asked Schexnayder.
Donelon answered, " I would say a probably and I would point out we’re not going to spend any money if they don’t; very confident that we will spend the money,”
“Well, if we come into a special session then we’re going to spend money,” said Schexnayder.
Rep. Jerome “Zee” Zeringue (R-Houma) chairs the committee made up of House and Senate members. He, too questioned Donelon.
“Mr. Commissioner, obviously in our region we took it on the chin and we’re still dealing with a lot of insurance issues as a lot of people are. One of the benefits you suggested is to take people off of Citizens, which is the insurance of last resort, is there a specific provision in the plan to require these companies, if they participate, to take policies off, out of Citizens?” said Zeringue.
Donelon said in response, “No sir and that was my original desire to have the incentive program legislation that was passed last year, I think unanimously through the process, to have it targeted to exclusively taking policies out of Citizens.”
Some lawmakers wonder if it would be better to use the money intended for the incentives package to instead help La. Citizens.
“Is it possible that we can maybe support Citizens, maybe make it more conducive to working with people, making it cheaper like taking the $45 million and getting Citizens to do reinsurance or investing in the, getting buildings, and working on building codes and things that we can work on here in Louisiana, the fortified building program or something like that with Citizens? asked Zeringue.
Donelon said making Citizens into a traditional insurer would be a disaster waiting to happen.
“No. 1 is putting Citizens in the reinsurance business. That is a huge, huge risk that Citizens can’t afford to take on, Louisiana can’t afford to take on,” he said.
He could not say when people paying high premiums through Citizens would see a drop in rates if new insurers enter the market.
“I can’t give you a date when rates will change, for one thing, it will change for everybody on their individual renewal date after the approval,” he said.
However, Donelon said if the incentives’ funding is approved soon he thinks insurers will remove 40,000 to 50,000 policies from Citizens.
“Finally, Plan B if this doesn’t work. What’s Plan B? asked Zeringue.
Donelon replied, “Plan B is to do it in the regular session and we will not have the same take-up from companies because they will not have the ability to reinsurance themselves for a significant increase in their book of business for coastal Louisiana.”
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