LOUISIANA VS. FLORIDA

Last January, the new governor of Florida pushed his Legislature to enact some sweeping property insurance “reforms.”

Unfortunately for taxpayers and insurance policyholders in the Sunshine State, those reforms will do little to increase†coverage†or, in the long run,†decrease the cost of property insurance. Instead, it puts the state and all policyholders on the hook for huge potential tax increases and assessments if tropical storms find their way back to Florida soon.

Louisiana’s Legislature will convene on April 30, and the property insurance issue will be a major topic of debate.

Refreshingly, Gov. Kathleen Blanco isn’t drinking the Florida property insurance Kool-Aid.†She is standing behind a reasonable package of bills that stands a much better chance for success in addressing our property insurance problems than the Florida approach is likely to accomplish.

In Florida’s elections last fall,†the governor and legislators made lofty campaign promises about drastically reducing the cost of property insurance in the state most susceptible to hurricanes. When it came time to deliver, they had no real solutions. Instead, they simply put the state and its†policyholders at great risk by artificially reducing rates in order to deliver on their promises.

If the winds blow, they are toast.

Gov. Blanco, quite correctly, decided against putting the state’s fiscal condition in peril in order to emulate Florida. She is taking the†position that keeping the free market intact is the best bet both long-term and short-term to address the property insurance crisis in the Bayou State.

At a recent news conference, the governor announced a package of bills designed to address Louisiana’s problems.

One is to abolish our archaic Insurance Rating Commission. The Legislature actually passed a bill to do this a few years ago, but the†prior governor vetoed it.

Another important piece of legislation that the governor is supporting would allow insurance companies to vary deductibles and not be tied in to having a “one size fits all” deductible in property insurance policies. Having the same deductible locked into place for both Grand Isle and Ruston just doesn’t make sense.

The major element in the Blanco administration’s property insurance package is an approach that is truly thinking outside of the box. The administration had originally†planned to use†$100 million to start a state Catastrophe Fund, modeled somewhat after Florida’s.

Unfortunately, it would take a huge amount more than $100 million for such a fund to influence the market in Louisiana, and the state could be on the hook for billions if it had such a fund and there were a repeat of the Katrina/Rita disasters.

In a shrewd move, Gov. Blanco decided instead†to use the $100 million for a novel new concept, a surplus match program designed to lure medium-sized regional carriers into the Louisiana market. The state will match, dollar for dollar (within limits), the new money these carriers bring into†Louisiana to write new property insurance policies. Strict rules will govern eligibility for qualifying for the match money.†

Additionally, the new carriers must continue to write policies for five years and use†25 percent of both†the state match†and their own dollars†to pull policies out of our troubled†Citizens Property Insurance Company.

Florida’s property insurance legislative actions are a disaster waiting to happen. Gov. Blanco’s approach stands a very good chance of success. It will be interesting to see how the two approaches are compared in the national†media if the Blanco package becomes law.