Louisiana Insurance Watchdog Handcuffed

by Christopher Tidmore

The appointment of Clarissa Preston as head of the newly created Office of Consumer Advocacy within the state Department of Insurance was hailed last fall as the commencement of a new era of consumer protection. Preston has argued to reporters that she would be a more effective watchdog than the Insurance Rating Commission though public outreach and monitoring auditing trends in insurance complaints.

Yet, in six months, not one lawsuit has been filed by her office on the literally thousands of complaints emerging from post-Rita and Katrina insurance conflicts, typically the job of a Consumer Advocate for Insurance in most state governments across the Union.

Preston, though, is hardly interested in suing her own boss. She works for Commissioner of Insurance Jim Donelon, having previously served as his Deputy Commissioner of Property and Casualty, before her current appointment last September.

In over 20 other states, Consumer Advocates for Insurance serves within the Attorney General’s office, and frequently go to court on the behalf of consumers if and when Insurance Companies overreach. When Louisiana’s Insurance Rating Commission was abolished by the legislature last year, the Office of Consumer Advocacy was created to ostensibly take its place, watching over the public interest in matters of coverage and compliance.

Several legislators wanted Louisiana to locate the Consumer Advocate under the Attorney General. Former Commissioner of Insurance Jim Brown supported their position noting that there would be an inherent conflict if the Insurance Commissioner, the man tasked with drawing companies to Louisiana and--thanks to the abolition of the Rating Commission--setting their rates, also had the job of disciplining them.

Brown wondered aloud how one lures underwriters and at the same time serves as their critic. “There is a fundamental conflict,” Brown told Bayoubuzz.com at the time.

His successor, Insurance Commissioner Donelon, disagreed. In an interview, he argued, “I don’t see any conflict…My office has all the information…We can balance the responsibilities.”

As a symbolic gesture, Clarissa Preston located the new office of Consumer Advocate on the first floor of the Insurance Department, separate from the other sections, and visibly more accessible to the general public. She has maintained in the media that her position in the Department allows her to talk to whomever she needs to get things done, allows her to access the department’s computer system to check out insurance rate filings that might call for a second review, and voice her opinion at staff meetings on behalf of consumers.

Yet, none of her procedures include what is standard fare in other states, the recourse to the law courts in case of inaction or non-compliance by underwriters.

Donelon argued to Bayoubuzz.com that Louisiana did not need more “litigiousness” in Insurance given the negative perception nationally of the state’s legal climate, but states with far lower insurance rates and healthier business climates allow their Attorneys General to purse consumer interest lawsuits against insurance companies.

In fact, Preston’s office is not even the primary clearing house for complaints against agencies and underwriters. Her personnel direct complaints against specific insurance companies to the compliance division of the Insurance Department and instructs them to file a complaint. If they are then unhappy with the resolution of their complaints, they can return to Preston’s office for more aid.

There is little doubt that Preston takes her job as advocate in the Department seriously, and most likely provides an outlet for routine complaints and problems, yet with an office interested and capable of resorting to state sponsored legal action, most insurance experts that this newspaper has consulted agree, puts policyholders in Louisiana at a disadvantage.

Under current statutes, Louisiana’s Attorney General is bared from consumer protection cases, particularly in Insurance, and could not, for example, join the Mississippi AG in a series of cases that provided higher returns for Katrina-victims in the year after the storm.

As a candidate for Governor, Bobby Jindal told this news outlet that he supported a transfer of the Consumer Advocate to the AG’s office, but has remained silent on the subject publicly since his inaugural. Several legislators have expressed an interest on reopening the debate, or at least empowering the Attorney General to pursue consumer protection cases dealing with Insurance, but so far, no bills have been pre-filed for next week’s regular legislative session.

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