Times Picayune reporter Rebecca Mowbray has the story on the latest move by the Louisiana Department of Insurance.
Starting in July, thousands of Allstate customers with homeowners policies that exclude wind coverage will get a break on their insurance bills, thanks to an effort by the Louisiana Department of Insurance that forced companies to increase the discounts they offer people who take on some of the risk of insuring their homes themselves.
After Hurricane Katrina, the insurance department became concerned that companies were reducing their risk by selling policies without wind coverage, or with higher hurricane deductibles, without passing on adequate premium savings to their customers.
Essentially, the department was concerned that insurers were still charging people for risk that was not on their books…
What Louisiana has done will make it more affordable for people to live in the high risk areas of the State.
Allstate went from giving all customers in the state who buy a wind and hail policy from Citizens a 35 percent break on their homeowners premium to giving customers in northeast Louisiana a 25 percent discount and those in southeast Louisiana as much as a 65 percent break on what they pay.
“The folks in South Louisiana should probably get greater credit than the folks up north because they have much greater exposure to wind,” said Rich Piazza, the insurance department’s chief actuary, who led the effort.
Under the old way of doing business at Allstate, a customer in Bastrop who paid $1,000 for full homeowners coverage would have gotten a 35 percent, or $350, discount if he switched to a wind exclusion policy, reducing his bill to $650 before he had to buy a separate wind policy from Citizens.
But a customer in New Orleans paying $2,000 for full homeowners coverage — policies cost more in New Orleans because of the hurricane risk — would have saved only $700, making his “x-wind” bill $1,300 for fire, theft and liability coverage.
Under the new regime, the Bastrop customer might get a 25 percent discount for a wind exclusion, raising his homeowners bill to $750 before he bought wind coverage from Citizens.
But the New Orleans customer would see a discount of anywhere from 58 percent to 65 percent. The change would push his bill down by $1,160 to $1,300, leaving him with a homeowners bill of $700 to $840 before he purchased a Citizens wind policy.
Allstate had promised at the December 2006 meeting of the Louisiana Insurance Rating Commission to look into the way it calculates premium credits, but Piazza said the company did not follow up until the department issued Bulletin 07-05 last summer ordering all companies to check their math. With Allstate’s compliance, the department feels that the heavy lifting on the initiative is done.
Rich Piazza, the insurance department’s chief actuary, led the effort. “Most of the companies are saying, ‘We think our credits are okay,” Piazza said. “We got frustrated, particularly with Allstate.
The next frontier for the insurance department is reinsurance, the coverage that insurers buy to cover claims beyond a certain level in the event of a catastrophe.
When companies file for rate changes in the future, the department will push to make sure companies adequately factor wind exclusion guidelines, deductible guidelines and the purchase of reinsurance, all of which take some of the hurricane risk off their books.
“We’re going to monitor this,” Piazza said.
http://www.nola.com/business/index.ssf/2008/04/the_department_of_insurance_ha.html