Coalition looks to improve La.’s insurance climate

In the wake of the devastating 2005 hurricane season, more insurers are still reeling from the financial hit.

At a time when many companies are pulling out of the region, at least one group is seeking ways to draw them back.

At last week’s South Central Industrial Association (SCIA) meeting, guest speaker Jeff Albright represented the Coalition to Insure Louisiana and spoke about ways to improve the insurance climate of Louisiana.

Albright, who is the chief executive officer of the Independent Insurance Agents and Brokers of Louisiana, spoke of ways to “bring more insurance markets and a better insurance climate to Louisiana.”

“The agenda that we are trying to develop is very much a middle of the road agenda that balances the interests of the consumers, whether they’re individual persons or businesses, and the insurance company,” said Albright. “We’re not a voice for the insurance companies. We’re a voice for Louisiana businesses that want to make our insurance climate and our insurance market better.”

Although Albright conceded that there are current problems in the insurance industry, he used past events to put present situations into perspective. “You have to go back in time,” he said, “to look at the history to put this in perspective.”

Albright pointed to past disasters, saying that shortly after storms such as hurricanes Andrew, Audrey and Betsy, insurance companies quickly fled the state. “If you’re not in the insurance industry, you may not remember,” he said, “that literally, within two weeks of Hurricane Andrew hitting the Louisiana coast, insurance companies started to leave the state, and they left en masse.”

The exodus, Albright said, was attributed to fear.

“When you boil it all down, it really comes down to two things,” he said. “Insurance companies only have two emotions. One is fear, and the other is greed … and ultimately, over the long term, greed always outweighs fear.”

Albright said that prior to hurricanes Katrina and Rita, the largest natural disaster in Louisiana history was the New Orleans hailstorm of 2002, resulting in just over $500 million in losses.

“To date, the insurance industry … has paid $17 billion in Katrina and $3 billion in Rita. It’s expected to be about $25 billion when it’s done,” he explained. “The insurance industry never imagined they could have a $25 billion storm in Louisiana. Which emotion takes over? Fear.”

He added, that eventually, “greed takes over,” and the market recovers from such a shock after two to five years. He outlined three phases to the market returning to normal:

• The insurance companies leave, and the residual market takes over—meaning Louisiana citizens. “It fills in the gap for a short period of time,” he said, “while the market recovers.”

• Surplus lines, or unregulated insurance companies enter the market place. “Why do they come back first … because they’re unregulated,” he said. “They can charge anything they want, and can create the policy forms they want.”

• Admitted and regulated insurance companies come back. “We’re not there yet,” he said. “We’re probably another two years from that happening, assuming that things go well, and there’s not another major storm.”

Albright said Louisiana has two choices—to either slow down the recovery of the market or to expedite the recovery.

He closed by saying that a key aspect of speeding up the recovery is to make the market more attractive to companies. “Change our insurance environment, a little bit, to make it a little more friendly to insurance companies to attract them back in,” he said. “Then give them some economic development to pull them in quickly, so that we can solve the problem in six months or a year, instead of a year and a half or two or three years.”