Citizens’ hikes under review

Any day now the state attorney general could render an opinion as to whether Louisiana Citizens Property Insurance Corp. correctly calculated new rate increases for storm coverage.

S. Denise Brignac, the board’s chairman, as well as chief of staff for State Insurance Commissioner Jim Donelon, leaked the news during a St. Mary Parish Chamber luncheon.

There, she also admitted that St. Mary Parish policy holders of Citizens Property Insurance have not been evaluated during the past three years for rate increases, which is why they saw a 170 percent increase on June 1.

But her two statements triggered a brief rapid fire of questions and accusations from state Rep. Sam Jones, St. Mary Parish’s only Democrat in the legislature, who called for a re-evaluation of Citizens Property Insurance, saying, “it is not serving its purpose.”

Brignac was a pinch hitter for Donelon, who was the originally scheduled luncheon speaker, but was recovering from surgery.

At present, Brignac said that St. Mary Parish has 3,999 policies with Citizens, 356 of which are commercial and 3,634 are personal.

She said that after Hurricane Katrina, the board began watching a trend that saw its storm coverage policies rise by 40 percent.

“As a board, we came to the conclusion that we had to do something to address this, because we found that our rates were too low,” she said. “So we decided to survey the market to see what it was offering.”

Also, she said Citizens’ office had too many complaints from Independent Insurance Agents, along with others in the market who said Citizens’ rates were too low and were driving business away from the independent agents.

Jones disagreed with her assertions.

“That’s really tough to say, that you guys hiked the rates up due to complaints from Insurance Agents,” the legislator said. “Citizens has recovered from past hurricanes, and it is liquid again. So when your financials don’t justify a rate increase, how can you?

“Then you admit that you haven’t evaluated our rates here for three years? Doesn’t the law allow Commissioner Donelon an opportunity to implement rate increases over 10 percent increments?

“And, if he didn’t do the assessment, how can he stick it to the people? He didn’t follow the law that you said he thinks he should.”

In reply, Brignac told Jones that Citizens and the state Department of Insurance are separate entities and are not run by the commissioner’s office.

“If we have made a mistake, I’m sure we will be revisiting this issue soon,” she said. “The Attorney General could come back and say, ‘You guys did it wrong.’”

Jones shook his head, saying that Louisiana citizens themselves are struggling.

“They are struggling to pay their mortgage, and in many cases the insurance they pay in their escrow is more than the mortgage payment,” he said.

Brignac assured Jones that she understood his frustration and would work with him on any future legislation that would help policy holders.

She also took time out to congratulate Jones and state Sen. Dan Morrish, R-Jennings, for passing last-minute legislation last month that will save policyholders statewide 8 to 10 percent off the policy costs of their renewals for this year. These rates she said will go into effect Aug 1.

So, as a result of that legislation, for example in St. Mary Parish, she said, instead of a 170 percent increase, you will see an increase of 151 percent.

The savings will come in parishes where a 10 percent requirement would be lifted where no private companies sell hurricane insurance.

Citizens is required by law to calculate its rates on either the market rate, the amount charged by private insurance companies that sell at least 2 percent of the policies in a given parish, or the actuarial sound rate, the amount that would cover expected losses and expenses.

But in several parishes, no private companies offer wind-only policies.

Additionally the bill requires that Citizens start reviewing its operations in search of ways to reduce rates, if possible.

“We tried to put in the bill, that should the state insurance commissioner need to raise any rates, he would have to do so in 10 percent increments; however Commissioner Donelon did all he could to kill that aspect of the bill, and he did,” Jones said.

“When you have an entity that is now failing, it is time to analyze where it has been, where it is, and is it serving the purpose it is supposed to serve, and I don’t believe Citizens is. It needs to be reactive to the conditions that are on the ground,” he added.

At the conclusion of the discussion, Brignac allowed for questions and answers from the audience.

Deborah Price, owner of the Frame Shop in Morgan City, said citizens are getting no relief from either side because private insurance is so unaffordable.

“It seems like the Insurance Commissioner’s Office has allowed the insurance industry to run insurance rates instead of the insurance commissioner looking out for his Louisiana citizens,” Price said.