Many Louisiana home and business owners were concerned when they recently learned that our property insurer of last resort—Louisiana Citizens Property Insurance Company of Louisiana--is raising its rates by an average of 18 percent effective October 1 of this year. Escalating property insurance premiums have been a problem in Louisiana since Hurricane Andrew slammed into our coastline. The damage and concern engendered by Hurricanes Katrina and Rita only added to an existing problem.
Louisiana had two clear choices to make in addressing the property insurance crisis. We could have followed the lead of Florida and enacted laws and regulations that would have encouraged property insurance carriers to leave or to stop writing. That would have forced an even larger portion of the marketplace to go into the residual market (Citizens). The Florida approach has done nothing to improve their insurance affordability and availability. All it did was to put the Florida state treasury at risk if any serious hurricanes do hit the SunshineState any time soon.
Louisiana wisely opted for a different approach. The focus here was to do anything and everything to get as many property insurance policies out of Citizens as possible. State law guarantees that Citizens will have the highest rates and generally the highest deductibles in the marketplace. It is not a good place to be if you are insuring property from wind storm damage. Governor Blanco supported an approach that attempted to increase the amount of property insurance being written in the private market. The wisdom of that approach is now becoming evident.
In 2007, the Legislature passed an incentive program designed to bring in new companies that were not currently underwriting property insurance policies in Louisiana. These carriers are getting a state match of up to $10 million for the surplus they must have available to be licensed to write policies in the BayouState. Essentially, they can write twice the amount in premiums that they have in surplus. That means that every $10 million state match equates to $40 million in new coverage being written. It is important to note that the companies participating must use at least 25 percent of the underwriting to take policies out of Citizens and must also do 50 percent of their underwriting in the "Go Zone" parishes that were affected by the hurricanes.
The first five companies to enroll in the program are now pulling policies out of Citizens. The first "depopulation" recently resulted in over 25,000 policy holders moving from Citizens to private carriers. Jefferson Parish--where policy holders will face a 35 percent Citizens rate increase next October--has already had 5,470 policy holders move to private carriers. Orleans and St. Tammany--two other hard-hit areas--both had 3,700 polices moved. A second round of the "depopulation" of policies will occur later in the fall after the close of hurricane season. There will also be another round of invitations for insurance carriers to join the incentive program--and early indications are that more companies are eager to do so. The companies that have used the program to start writing property insurance are engaging agents and actively writing in the voluntary marketplace as well--creating some much-needed competition in the property insurance realm.
When all is said and done, all of the problems with property insurance in Louisiana won't be cured by the incentive program, but competition is being enhanced, the market is softening in many areas, and business owners and families are being able to move to more affordable and predictable policies. Compare that with what is going on in Florida and see which approach is working better.
I hear what you're saying... I was just stating that when many pay (like when SS first started and there was 11 people working for every Social Security recipient) and few collect the burden on those who pay is correspondingly smaller than when you have a situation where there are - say - 3 people working for every retiree receiving government benefits. There are many issues with this including the fact our government spends SS taxes on any ol' damn thing and writes itself an IOU that taxpayer's will eventually pay instead of 1) saving the money for its intended purpose or 2) giving it back to those who paid this "overcharge" (good luck getting # 2 past a Democratic politician - any refund going proportionately back to those who pay - leaving out those who pay not a penny - would be labeled "tax cuts for the rich"). Public or private, when a large percentage collect this causes the "rates" to go up for those who pay into the system. Our "flooding problem" will naturally cause insurance rates and taxes to increase since no matter how it is "divvied up" neither the insurance companies nor the government has a single thin dime that "the people" (some of us, anyway) had to work for then fork over. Written by dat's all
on 7/2/2008
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Risk spread should be an Insurance Industry only concern..... What happens is that when insurance companies can not cover loss, the Government covers the loss.... So, all insurance industries should be joined together somewhere down the line, and instead of relying on the federal treasury, it should be their own treasury that is the buffer to chaos... And profits, instead of being directed by the few which were surrendered by the many, should be taxed accordingly with the excess funding programs that are necessary.... I do believe the insurance industry is a major player in oil market speculation and the associated costs increase... Yet they have the police to enforce their laws, which is to help them buffer out of pocket expenses [seat belt laws, baby booster seats, etc., etc., etc.] they have the military enforcing their investments in 'risk' on foreign soil, [oil rigs, deliveries, foreign factories] etc., etc., etc. Lord, a book could be written on this subject.................... Written by
on 7/2/2008
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Risk/Loss……….. An interesting abstract……………. Loss, once it occurs is a static condition. Risk is an opinionated value assessed collection directed towards the subject of ‘anticipated’ loss that is generally considered in an inflated abstract……. Enter ‘Insurance’……. This is the ‘bet’ or the ante-up…… Where retirement is to be concerned, and even going as far as not including “social security” consider the Insurance/Loss abstract… Risk is not involved……. And the Loss can be directly labeled as “Loss of youth”, or in other words, the inability to generate capital in the same fashion as one could in younger years as a result of a naturally occurring weakened condition……. “One cannot swing a sledgehammer when one is 65 as well as it could when it was 20”…. There is no risk in this………….. it is a universal condition presented by nature that is the condition of mortal life….. The only ‘risk’ involved is if the person did not put away enough savings in its younger years to cover its needs and wants in its waning years……… You cannot insure against death, or weakness, it happens…. When risk is assessed in a social fashion, it attempts to exude some form of power over events, and the overburden involved with a higher assessment over that which is an actual expenditure is where a vast hobbling effect occurs…… In an attempt to cover any abstract short falls as a result of pursuing that notion a calling to accountability occurs, and a call to war can be proclaimed to make up for any missing security that came about as a result of redirection towards anything other than what the premiums were originally surrendered for…. This condition can take on various forms either from the replenishment of surrendered premiums in the form of escalated demands to stabilize the program, or through an act of requisition through some other means or entity when the insured is incapable of producing the toll demanded while it simply gets old……. Everything is a risk,, just living is a risk… It is ludicrous to think that every, any, or all eventualities associated with damage or loss can be fully or equitably renumerated……. It is a big subject, this insurance thing, but right now it appears that there is a vast gap, or discrepancy when considering income versus out go in the insurance industries portfolio……….. Written by
on 7/2/2008
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Insurance - including Social Security - works well as long as there are many who pay into the system compared to those who collect. If a large percentage of the people collect then the burden on those who pay is increased. So... those who smoke increase the costs for those who have medical insurance and lead healthy lifestyles and those who live in flood prone areas cause home insurance to increase for those on higher ground. Nothing to do with "greedy corporate" entities. Written by shared pain
on 7/1/2008
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Look, the insurance industry across the board needs to be reigned in...... It is one of the biggest stumbling blocks to industry in the United States, and, as Katrina has boldly shown, one of the most corrupted money sucking entities in existence that is not only allowed to conduct business, but is regulated by the states they serve.... So, reform???? How about some insurance industry reform Piyush?????????? Written by Yeah, it is another problem to be addressed
on 6/30/2008
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