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Thursday, August 13th, 2015

Baton Rouge, Louisiana


 If there was one area of financial help that could have and should have been addressed by the Louisiana legislature in its recent session, it was insurance reform. After all, a Dallas-based research firm completed a new study last month that concluded that Louisianans pay a greater percentage of their annual income for insurance than folks in any other state. How did the legislature respond to this dubious honor? They took quick action and raised every Louisiana policyholder’s insurance rates.

The Dallas report found that the average Louisianan pays 18.1 percent of their median annual earnings for insurance — that includes auto, homeowner’s, health and life insurance. That’s the highest rate in the nation — well ahead of more prosperous states like New York, Florida, Rhode Island and New Jersey. We’ll no doubt hear that hurricanes cause the Bayou State’s high property insurance rates, but note that all these states behind Louisiana suffered major losses by Hurricane Sandy.

Blaming high property rates on hurricanes is a cop out. Other Gulf Coast states have the same hurricane exposure, yet pay significantly less as shown in the Dallas study. Our neighbors to the east and west pay a significantly lower portion of their average median income for insurance. Texas averages 13.7%, while Mississippi policyholders pay 14.8%.

On average, Louisianans spend $3 billion more than other policy holders though out the South. That’s $3 billion of new spending that won’t go into the Louisiana economy.

So just what action did legislators take to help alleviate this financial burden? First, a new law was passed that will tax auto policyholders some $22 million dollars to pay for a 270% increase in the cost of an insurance company obtaining a person’s driving record report from the state police. Everyone agrees that insurance companies will pass on the additional cost to drivers throughout the state resulting in an increase in auto insurance premiums beginning with the next renewal.

The legislature continued its bilking of policyholders by taking away 28% (or $60 million) of a tax credit homeowners have received for a number of years because of the huge debt incurred by Citizens Property Insurance Company. For those of you not familiar with this boondoggle, Citizens was a disaster waiting to happen from its very inception.

Created by the Louisiana Legislature at the behest of the Insurance Department, Citizens was one of the most poorly constructed business operations ever conceived by a state legislature. With no capital and no surplus available to get Citizens started on a sound footing, the company was broke from day one. It became obvious early on that no one at Citizens had any idea of how to run an insurance company.

In addition, a mother’s mantra of any successful insurance company is that there must be adequate reinsurance. There must be a safety net in case a storm like Katrina comes along. The legislature and the insurance department failed to require that Citizens have sufficient reinsurance. And that single negligent decision stuck Louisiana policy holders with a bill that will exceed $1 billion. By virtually every standard that a private insurance company must measure up to, Citizens has failed miserably.

With this new assessment now being saddled on the backs of Louisiana property owners, the Citizens debacle continues to get even worse. The best solution would be to shut the company down completely. At a minimum, Citizens needs major restructuring with more requirements for both legislative and auditor oversight.

Unfortunately for those stuck with the bill, there seems to be little concern at the state capitol to straighten out a broken system that has caused financial grief for so many Louisiana policyholders. Will the coming election make any difference?


“It’s not hurricanes that are causing high insurance rates, but bad government policy,”

Policy analyst Michelle Minton

Peace and Justice

Jim Brown

Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide.  You can read all his past columns and see continuing updates at http://www.jimbrownla.com. You can also hear Jim’s nationally syndicated radio show each Sunday morning from 9 am till 11:00 am, central time, on the Genesis Radio Network, with a live stream at http://www.jimbrownla.com.








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