Jim Brown on Louisiana Citizen

Jim was kind enough to share this week’s column with us including fresh rumors from the Louisiana Department of Insurance that explains why they did not cooperate with the investigation that lead to the indictment of Citizens former CEO Terry Lisotta.¬† – sop

Thursday, December 11th, 2008

Baton Rouge, Louisiana 

LOUISIANA CITIZENS INSURANCE SCANDALS CONTINUE TO GROW

A year ago, it would have been hard to imagine that conditions at Citizens Property Insurance Company could get any worse. The state created and state run company was in debt by over $1 billion. The Rouge Business Report called Citizens the biggest financial disaster in the state’s history. But never underestimate the ability of some state agencies to make a dysfunctional situation go from bad to worse. The Board governing Citizens, that includes statewide elected officials, has shown little oversight of the Companies’ spending and management decisions, sparking not only criticism from the Legislative Auditor in Louisiana, but also provoking major investigations by both state and federal law-enforcement agencies.

The latest Citizens scandal boiled over last week when the former CEO was indicted with 14 counts of theft by fraud, filled with allegations that he spent more than $285,000 on questionable expenses including airline tickets, meals, retirement gifts and stays at lavish hotels. But his attorney said last week that his client is being singled out and “used as a scapegoat” in the poor management of the insurance company. Sources close to the investigation seemed to agree, saying that the latest indictments are just “the tip of the iceberg.”

The whole controversy has significantly elevated due to the resistance of Louisiana’s Insurance Commissioner to turning over some 2000 e-mails requested by the Legislative Auditor’s office. Continue reading “Jim Brown on Louisiana Citizen”

State Farm’s 67% rate increase request raises important issues

Brian Martin’s comments on the Open Thread provided links to news from coastal areas as distant as Massachusettes and Texas – including one about the 67% rate increase State Farm has proposed in Florida.

State Farm Florida Insurance Co. now wants a 67 percent average statewide property insurance rate increase, months after Florida Insurance Commissioner Kevin McCarty said he would reject the insurer’s proposed 47 percent rate boost.

Three issues of particular interest were raised in the story:

  • discounted rates for certain property improvements;
  • projected exposure for the upcoming year; and,
  • an adequate surplus.

discounted rates for certain property improvements

The insurer said it took a big hit on discounts it’s required by state law to provide for policyholders who fortify their houses and condominiums against hurricanes. The number of State Farm policies that qualified for discounts in Florida increased from 112,000 in late 2006 to 264,000 as of August.

Ironically, State Farm struck a deal with Florida insurance officials in September agreeing to refund $120 million to policyholders and pay the state a $1 million fine to make up for discounts it should have provided for hurricane-resistant homes.

If discounts are a revolving door for rate increases as this suggests, then the stage is being set in Mississippi and Louisiana according to recent Insurance Journal interviews with the Insurance Commissioner in each state. Continue reading “State Farm’s 67% rate increase request raises important issues”