Citizens Insurance is the Louisiana equivalent of the Mississippi Wind Pool. Due to incentives passed by the legislature private carriers are taking over 30,000 policies. However, as Rebecca Mowbray reports, things aren’t quite as simple as transfering the policies to a private carrier.
Responsibility for about 30,000 homeowners insurance policies is expected to be transferred from Louisiana Citizens Property Insurance Corp. to private insurers that won incentive grants from the state starting on June 1, shrinking the state-sponsored insurer of last resort to nearly its pre-Katrina size.
In addition, two of the five companies that won millions of dollars in matching grants from the state have begun selling homeowners policies to the public, and others are expected to follow later this summer.
John Wortman, chief executive of Citizens, said the group plans to offer a second “takeout” round in the fall, when private companies can bid to take over policies in Citizens.
“We had hoped to take as many as 35,000 policies out in the first year, and I think we’re going to beat that, so I’m pretty pleased,” Wortman said.
Companies participating in the takeout process were required to submit lists to Citizens last Thursday detailing which policies insurance agents had agreed to release to them, subject to permission from individual homeowners. Companies had requested to take over 34,900 policies, but Citizens discovered instances where multiple companies had bid for the same policy, reducing the takeout to about 30,000 policies.
Citizens has about 160,000 policies right now, so the effort should bring Citizens within striking distance of its 125,000 pre-Katrina policies. “It’s about back to pre-Katrina numbers,” Wortman said.
There had been concern that the program would fall short of its goals because many insurance agents, who by law must be the conduit for transferring policies, had said they did not feel comfortable moving their Citizens policies to takeout companies without enough information about their rates and policies.
Louisiana has an unusual state law that gives insurance agents the renewal rights to policies they have booked. This required companies to go through the cumbersome process of asking agents’ permission to take over policies, rather than making offers directly to the homeowner. Insurance agents and takeout companies alike said that the law made the process needlessly complex.
“This should have been consumer-driven from the get-go, not agent-driven,” said Al Pappalardo, an insurance agent with offices in Lakeview and Mandeville.
Now that companies and agents have settled on lists of policies to be transferred, homeowners can expect to get letters in the coming weeks asking them to sign off on the switch.
Starting June 1, companies will take over responsibility for paying any claims that might arise on the policies slated for transfer, then those policies will be rewritten on private stationery as they renew starting Oct. 1.
Meanwhile, two of the companies that won incentive grants from the state, ASI Lloyds and Imperial Fire & Casualty Insurance Co. have begun selling new homeowners insurance policies, but Imperial is focusing on the northern two-thirds of the state at the outset to make sure it doesn’t have too much risk concentrated in hurricane-prone areas — the very places where coverage is in short supply.
“We have to watch our exposure,” said Paul Harrison, president and chief operating officer of the Opelousas company. “We’re not going to be writing a lot in the southern part of the state for a couple months.”
Other companies also say they’re exercising caution. Occidental Fire & Casualty Co. of North Carolina said it hopes to start selling new policies sometime this summer, and Southern Fidelity Insurance Co. said it expects to follow at the end of the summer.
“When you enter a new market, you’ve got to be careful,” said Jim Graganella, president and chief executive of the Tallahassee, Fla., company.
Americas Underwriting Agency, which expects to complete its purchase of a dormant insurance company this week, says it will be ready to write new homeowners policies in August. Americas did not receive grant money from the state, but requested about 500 policies out of Citizens.
Wow.
I am SO relieved that even more crooks are planning to rob people in Louisiana. If you want to know where organized crime went, look at insurance companies in Louisiana, and their willing accomplices in the State Legislature. I will never be persuaded that any insurance company doing business in Louisiana is not as crooked as a grape vine. I would rather walk naked through the projects in New Orleans at midnight with a bag of cash strapped to my back than do business with an insurance agent in Louisiana. Legalized criminals that makes the Mafia look like ametures. The criminals have written the laws. We, the citizens, are Screwed.