State eyes effort to lower home insurance policies

(AP) The state Insurance Department wants companies to review the discounts they offer for policies that don’t cover wind or have high hurricane deductibles.

Department officials believe many policyholders may be paying too much in premiums, including homeowners with deductibles for hurricane damage calculated as a percentage of the value of their houses, the department said.

While the hurricane risk now takes up a bigger part of what south Louisiana policyholders pay, most companies haven’t raised the discount that policyholders get if the company eliminates the risk by forcing people to pay for the first share of storm damage through a deductible, or by buying their hurricane coverage from Louisiana Citizens Property Insurance Corp.

Rich Piazza, the state’s chief actuary, said consumers should see a bigger drop in their bills if they help the company scrap the risk. “The folks in south Louisiana should get a whole lot more money back by excluding wind damage,” he said.

The department had asked companies to review their discounts following changes in hurricane models and reinsurance; most didn’t. So, on Aug. 29, the second anniversary of Hurricane Katrina, Insurance Commissioner Jim Donelon released a bulletin requiring that companies review their premium credit programs by Oct. 31. They must then make an informational filing vouching for the program’s accuracy or propose a new program.

“All future rate-level filings for residential property insurance in Louisiana shall contain adequate, relevant and appropriate evaluation of wind deductible credits and wind exclusion credits currently filed and being used in the rating plan,” the bulletin states.

Donelon said companies “may not be providing adequate credit for policies excluding coverage for wind that are currently being written or will be written in the future,” and that they’ve been “reluctant” to make changes to “keep up with Louisiana’s changing environment.”

Bob Hartwig, president of the Insurance Information Institute trade group, rejected any suggestion of overcharging. But Bob Hunter, director of insurance at the Consumer Federation of America, sees the bulletin as the Insurance Department acknowledging companies may have been ripping people off.

“Why weren’t they on top of this?” he asked of the department.