Insurance costs hit home, for all of us – including the good neighbor and LA Insurance Commissioner Donelon, too

“One thing is certain.  The more we all spend on insurance, that’s less money that we spend on other things, like cars, and refrigerators, and clothing.  Until the problem is solved, our recovery will never be complete…”

WLOX reporter Doug Walker hit the road for a week in January to learn more about the insurance situation and found Insurance costs hit home, for all of us.

During my travels, I met a widow whose insurance bill has climbed from $2000 a year in 2004 to more than $7000 now.  Another homeowner was told his insurance was going up from $2400 a year to $6300.  He finally got a policy through an independent broker with Lloyd’s of London for $4000.  The list goes on and on.

Indeed, the list does go on and on and, as Walker points out, insurance cost is not just a Mississippi issue.  State Farm found that out yesterday and Rebecca Mowbray caught the story for the Times Picayune – Insurance Commissioner Jim Donelon rejects 19 percent statewide rate increase request by State Farm.

“This is an out-and-out rejection,” Donelon said. “We’re so far apart, we don’t feel like there’s a reasonable chance for compromise.”

State Farm, which is free to submit a new request, said that it was stunned and disappointed by the rejection…

If the request had been granted, State Farm would have been able to collect an additional $67.6 million from its customers in Louisiana. (emphasis added)

State Farm’s requested increase would have pulled $67,600,000 from Louisiana’s economy.  Calculated for the items listed in Walker’s post,  there would be  2380 fewer new cars purchased or 56,333 new refrigerators sitting in stores – or, worse yet,  the 781,403 school-age Who Dat’s would not be wearing a replica of Drew Brees’ Super Bowl jersey.

Donelon’s rejection is the culmination of a battle that has been brewing over the past year over State Farm’s use of a hurricane computer model that seems to project a need for much higher rates than its competitors. Continue reading “Insurance costs hit home, for all of us – including the good neighbor and LA Insurance Commissioner Donelon, too”

What a coincidence – State Farm files for 19% rate increase in Louisiana!

Table created with data from the Daily Comet

After MID awarded State Farm a 19.5% rate increase, the Company decided to forgo the shock ’em  first approach it brought from Florida Mississippi- …and the score in the State Farm game was 45-19.5…– and go with a 19% requested increase in Louisiana.

The Times-Picayune carried the AP story; but, hanging on Editilla’s Ladder was the more detailed story in the Daily Comet.

“State Farm, Louisiana’s largest homeowners insurer, has asked regulators for a 30 percent rate increase for policyholders in Terrebonne and Lafourche parishes.

Coastal parishes would take the brunt of the proposed increases, which average 19.1 percent statewide.

The Louisiana Department of Insurance will consider the request, which could generate $67.6 million, or an average of about $229 per Louisiana policyholder. The company has about 296,000 policyholders in the state…”

This brings us to the part of the story where things start to go fuzzy, shall we say.  Continue reading “What a coincidence – State Farm files for 19% rate increase in Louisiana!”

Jim Brown devotes a radio segment to the dysfunctional Louisiana insurance market and AIG’s insolvency

Yep he did. Keep pounding Jim, AIG policyholders need not also be bagholders too.

[youtube=http://www.youtube.com/watch?v=IEoK2BdDtj4]

that special relationship of trust and a deep sense of betrayal

Insurance is a very special product. You pay and you pay and you pay premium dollars, often for your entire life. In return you only get a promise. A promise that if you ultimately have a covered claim, and you’re paid up, they must pay that claim. The problem is that they must have that money, for years and years, kept safely and invested legally in order to be able to pay your claim if they so choose. It’s that special relationship of trust that imposes on an insurance company an obligation of truthful financial reporting in their financial statements.

If you, too, consider insurance a very special product, as you read AIG CEO formerly headed up Allstate insurance company you will see how the industry’s conduct following Hurricane Katrina caused that special relationship of trust to become a deep sense of betrayal.

To many on the Gulf Coast, watching AIG chief executive officer Ed Liddy talk about the sanctity of contracts in defending the award of $220 million in bonuses to employees at the embattled insurer was an ironic moment.

If only Liddy held that same view of contractual obligations to policyholders after Hurricane Katrina when he was at the helm of Allstate, Louisiana’s second largest insurer.

“How about that?” quipped Bob Hunter, a New Orleans native who is director of insurance at the Consumer Federation of America and the author of a 2007 study documenting the decline of claims payout ratios at Allstate during Liddy’s tenure. “He’s always disregarded contracts to maximize profits.”

Liddy was appointed by the federal government in September to run AIG when the ailing insurer got its first installment of taxpayer bailout money, which now totals $170 billion.

Before caving to pressure on Wednesday and saying that he would ask those who received more than $100,000 in bonuses to return half of the money, Liddy argued that the money needed to stay where it was because contracts are sacrosanct.

That Liddy was forced to cave in to pressure is eye for an eye– justice to policyholders pressured to settle for less coverage than they purchased.  Many had to fight for even that; and, sadly, some still are. Continue reading “that special relationship of trust and a deep sense of betrayal”

Jim Brown on Socialism and Insurance, Louisiana Style

Jim was kind enough to email me his latest column, which is simply excellent. Here in Mississippi the talk is putting even more taxpayer money into the wind pool. In both cases we note Republican administrations have well honed their new found skills practicing socialism. – sop

Thursday, January 8th, 2008
Baton Rouge, Louisiana

LOUISIANA TAXPAYERS ARE THE LOSERS IN PROPERTY INSURANCE SCHEME

In days of old, Robin Hood took from the rich and gave to the poor. When it comes to insurance, the Louisiana Legislature and the Insurance Department do just the reverse. They apparently think it is better to take from every taxpayer, rich and poor alike, and give away public funds only to homeowners, who are more likely to be a little better off. If you don’t own a home, either by choice or because you cannot afford to, your tax dollars are taken out of the state general fund to be given away as a gift to those fortunate enough to be a homeowner. It’s Robin Hood sticking it to the little guy.

The Louisiana insurance Department is ballyhooing the giveaway program as homeowners getting part of their insurance premiums back. Headlines in several of the state daily newspapers bought in to the Department press release by stating that “Homeowners may get rebate on Insurance.” But this was a misleading fiction, since there was no rebate involved. Homeowners were not getting a rebate on what they had paid for insurance. What they were getting was a handout of state general funds from the legislature. Great if you qualify for the handout. But it’s a giveaway for only a certain class of people, and completely inconsistent with the prudent expenditure of taxpayers’ dollars. Continue reading “Jim Brown on Socialism and Insurance, Louisiana Style”

“no class” in Citizen’s hearing

What was scheduled as class action hearing on $35million Citizen’s settlement turned out to be a display of “no class” at all.

Rebecca Mowbray has the story – and I can’t help but wonder what she was thinking yesterday as she was typed Judge orders lawyer to jail after fight breaks out in Citizen’s class action hearing.

A fight broke out this morning at a hearing in a class action lawsuit against Louisiana Citizens Property Insurance Corp., ending with one lawyer on the ground and another being ordered to spend the night in jail.

Attorneys J. Robert Ates and Madro Bandaries exchanged words at Orleans Parish Civil District Court, then suddenly appeared to be on the verge of a fistfight when Bandaries fell to the ground.

Some attorneys stepped in to break up the fight while others ran outside to alert security and find Judge Kern Reese, who is presiding over the hearing.

Reese ordered Ates to spend a night in jail and pay a fine of $100, despite his pleas to be allowed to offer his testimony. Ates, who is representing an objector to the proposed $35 million settlement, was taken away in handcuffs.

“The one thing I am not going to tolerate is lawyers being unprofessional,” Reese said after taking testimony from several witnesses to the fracas and concluding that Bandaries, who brokered the proposed settlement, had been attacked.

Today’s hearing, which is ongoing, is being held to determine the fairness of the proposed $35 million settlement of charges that Citizens didn’t handle claims quickly enough after Hurricane Katrina. If the settlement is found to be fair, it will pave the way for the settlement to be finalized.

Attorneys in a rival class action suit in Jefferson Parish say the settlement in New Orleans shorts policyholders and raids their effort. Their case has a summary judgment hearing scheduled for January and a trial date in March.

At this writing, Insurance Commissioner Jim Donelon is on the stand.

Will update as information becomes available.

Insurance – it’s a small world

As the national economy plunged this fall, the timetable for the recovery of Louisiana’s beleaguered property insurance market may have slowed with it, Insurance Commissioner Jim Donelon said.

Insurers are required to have a certain amount of capital on hand for every dollar of each homeowner’s policy that they write to make sure they have enough money to pay claims in case a hurricane or earthquake destroys large swaths of homes.

But with the value of insurers’ investments being eroded with the stock market in recent months, companies have less money available to write new business. In the most extreme cases, insurance companies could find themselves without enough money on hand to cover the homes that are already on their books.

Bob Hartwig, an economist who is president of the Insurance Information Institute trade group, said Louisiana’s large and ever-present risk of hurricanes is a much bigger factor in insurance availability and price than any fluctuations in the value of insurers’ investments.

Hartwig told Times Picayune reporter Rebecca Mowbray he believes market conditions will affect the state’s property insurance landscape. How insightful! Continue reading “Insurance – it’s a small world”

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”