The headlines blared throughout newspapers and tv stations final week. “State insurance coverage leaders be a part of forces on Disaster Reform Legislative Package deal,” penned the Lake Charles American Press. “An insurance coverage reform package deal is working its means via the Louisiana Legislature, “publicized TV station WDSU in New Orleans. Comparable stories fanned information media throughout Louisiana.
So simply what are these main new “catastrophic legal guidelines” that can get insurance coverage claims resolved shortly and decrease the outrageous charges the general public is at the moment being charged? With few exceptions, it’s all window dressing. That’s proper. Nearly each proposal by members of the legislature might be applied and made a requirement by a easy directive issued by the Division of Insurance coverage.
If an insurance coverage firm is delaying the fee of claims or “lowballing” by not paying official claims in full, the Insurance coverage Division has loads of authority to levy main fines and even revoke the constitution of the corporate that continues to disregard these rules.
One other supposed “catastrophic change” requires elevating the minimal capital and surplus requirement for current insurance coverage firms from $3 million to $5 million by the end-of-year 2026, and to $10 million by end-of-year 2031. Such greater necessities shouldn’t be essential if the Insurance coverage Division is correctly inspecting insurance coverage firms positioned in Louisiana.
There was a woeful lack of reinsurance necessities for Louisiana insurance coverage firms, all that needs to be set and required by the Insurance coverage Division. Insurance coverage firms are required to purchase their very own insurance coverage in case they don’t have sufficient reserves to pay the claims of policyholders. That’s what reinsurance from different main firms specializing in reinsurance is for.
One of the best instance of an organization having the ability to function in Louisiana and never have sufficient reinsurance is the creation by the Insurance coverage Division of Residents Property Insurance coverage Company. That is the corporate that U.S. Senator John Kennedy, whereas serving as Louisiana state treasurer, known as the largest monetary catastrophe within the state’s historical past. Residents has been a calamity from the get-go, and has price Louisiana taxpayers nearly two billion {dollars}. It had nearly no reinsurance. So if Louisiana insurance coverage firms are going broke, the regulators have been negligent in not correctly requiring sufficient reinsurance.
As an alternative of clamoring for unneeded new authority to extend oversight, and extra necessities on the insurance coverage trade, the legislature ought to take an in depth take a look at why these identical necessities are usually not being enforced. Now if most of those proposed new “catastrophic legal guidelines” are pointless, simply what ought to the legislature be requiring?
First, as Senator Kennedy has instructed, abolish the dysfunctional Residents Property Insurance coverage Company. The corporate has been mismanaged, and has confronted one controversy after the opposite going again to its inception.
Second, cross laws requiring the governor and the insurance coverage commissioner to fulfill with different state officers in surrounding southern states to type a joint catastrophic insurance coverage pool. Latest hurricanes in south Louisiana present dramatically how the state is simply too small to go it alone with regards to coping with hurricane associated insurance coverage points. These deep southern states have to create a complete response mechanism for mega-catastrophes. There may be ample proof that such a program is each essential and demanding to any reasonably priced insurance coverage answer in Louisiana.
Third, Louisiana wants greater than passive regulation. Correct regulation touches each single citizen. Following the latest spat of hurricane destruction, 1000’s of individuals might lose their properties because of the uncertainties of their insurance coverage. There’s a want for an aggressive, well-informed vocal advocate. Quite a few states have an insurance coverage client advocate positioned below the governor’s workplace. An insurance coverage commissioner, who receives political contributions from the insurance coverage trade, it’s not the individual to supposedly be searching for policyholders. It’s the proverbial fox guarding the home. Higher safety must be afforded to all insurance coverage coverage holders.
What’s the previous Confucius saying? Needing insurance coverage is like needing a parachute. If it isn’t there the primary time, likelihood is you received’t want it once more. It’s crunch time to place legal guidelines on the books which have some enamel and that may actually shield policyholders in Louisiana.
Peace and Justice
Jim Brown’s syndicated column seems every week in quite a few newspapers all through the nation and on web sites worldwide. You possibly can learn all his previous columns and see persevering with updates at http:// www.jimbrownusa.com. Readers may assessment books by Jim Brown and plenty of others he has printed by going to http://www. thelisburnpress.com.