La. Legislature votes to abolish insurance regulating panel

The Legislature on Thursday approved Gov. Kathleen Blanco’s unique, $100 million plan aimed at stopping the steady rise in homeowners insurance costs since hurricanes Katrina and Rita struck in 2005.

Blanco intends to offer grants of up to $10 million to each insurance company that agrees to start writing new homeowners and commercial policies along Louisiana’s coast, which faces the annual threat of massive hurricane damage. Blanco believes the financial incentives will bring enough new insurers to the state that competition will rise, forcing rates down.

Lawmakers gave their approval after haggling over the details of the plan throughout their two-month legislative session.

Critics of the plan said the plan was too theoretical, with no guarantees that spending the taxpayer money would lead to lower rates. Sen. Butch Gautreaux, often a Blanco ally, said he worried that companies would come to Louisiana and focus on commercial insurance, ignoring the coastal homeowners whose rates have spiked since the storms.

“This really troubles me,” said Gautreaux, D-Morgan City. “It indicates to me that there’s an unwillingness to make this work out for the residential policies.”

Insurance experts consider Blanco’s plan the first time a state has offered financial incentives to insurers in the way states routinely offer public money to lure manufacturers and other businesses.

Called the “Insure Louisiana Incentive Program,” the plan was devised by the pro-business Louisiana Association of Business and Industry and championed by Insurance Commissioner Jim Donelon.

Lawmakers approved an amendment by Sen. Walter Boasso, D-Arabi, that ties the plan to a tax break for homeowners, worth just over $100 million: they would get credit for a portion of their insurance premiums since 2005.

Blanco said she would have preferred that the bill not carry the tax break, but had no intention of vetoing the bill because of it.

“I like bills to stand on their own, but I also understand the legislative process,” said Blanco, a former House member.

Blanco also won approval of another move favored by the industry: abolishing the state’s Insurance Rating Commission, a panel made up of political appointees. Insurance companies see the panel, which has the power to block rate hikes, as an unnecessary government impediment in the marketplace.