In the years following Hurricane Katrina Louisiana has seen success bringing down the number of policies in its state run windstorm insurer, Louisiana Citizens Property Insurance Corporation. This is a trend which promises to continue or even accelerate with a new piece of recently signed by Governor Bobby Jindal. The bill, HB 952 now allows insurers who remove policies from Louisiana Citizens to have their pick of policies instead of being forced to take them in a bundle. The new regulation moves away from the previous policy which banned so-called “cherry-picking laws,” designed to prevent insurers from taking only the best of policies from Citizens leaving the weaker, more risky policies behind.
Cherry-picking laws have not worked well in other states like New Jersey where rates have risen and competition has diminished. This happens because insurance companies can stay in business only if they can build balanced portfolios of policies. Letting regulators determine if they’re “cherry picking” undermines this fundamental business model. Moving away from these restrictions should encourage more insurers to enter the market and take additional burden off of Citizens, leading to more competition and lower prices for consumers.
Louisiana continues to be one of the most improved states in opening up its property and casualty insurance markets to private competition and away from reliance on a state run windstorm insurer. Even in the aftermath of Hurricane Katrina, Louisiana has managed to retain a reasonably healthy private insurance industry. Almost five years after Katrina’s landfall, insurance has remained available—although expensive—in the state. Unlike Florida to its east and Texas to its west, Louisiana has steered a moderate, common-sense course in dealing with insurance.
New carriers writing property insurance have entered the state, and even though Louisiana was the site of the nation’s largest natural disaster, premiums are actually lower than in Florida or Texas. Governors Kathleen Blanco and Bobby Jindal and Insurance Commissioner James Donelon deserve credit for this. Without leaving individuals in the lurch or forcing homeowners of modest means to go without insurance, they have implemented largely successful reforms that have brought insurers back into the state.
