Jim Brown is not happy with insurance costs.
The former Louisiana insurance commissioner-turned-print and radio commentator consistently compares the cost of any kind of insurance in Louisiana with that of other states while trying to shape the debate among lawmakers, Department of Insurance and companies to reduce premiums for policyholders.
1. What’s the state of property insurance in Louisiana?
The highest cost in this state is insurance. Louisiana has the highest cost of property insurance in the country. Insurance groups say, “We don’t want to be like Florida. They have a horrible insurance climate there.” If you look at it, things are almost half the cost there in many areas. If things are that bad, then why is Florida paying half the cost?
2. Florida and Louisiana face similar challenges when it comes to dealing with the cost of major storms that impact the state. Why do you feel Florida’s strategy trumps Louisiana’s?
There is no Louisiana strategy for several reasons. One is institutional, the way we oversee the financial industry in Louisiana. We have an elected insurance commissioner. Most states don’t. They are appointed. What that means is that the governor that appoints them has to be very involved with insurance issues. Florida’s system is not perfect because no insurance company can make any money in Florida. But at least they are trying with a focus from the Legislature and the executive branch. In Louisiana, since we elect the insurance commissioner, the governor pretty much says, “That’s the insurance department’s problem. I’m not too concerned about insurance.” The Legislature barely mentioned insurance in this past session. It just hasn’t been a front-burner issue.
3. How does reinsurance impact the cost of property insurance in Louisiana compared to other states?
Florida offers reinsurance to the private sector. They put state money into a fund every year and told the Florida insurance companies, “We’re going to offer you reinsurance because it’s so expensive.” Louisiana has no catastrophic fund. They rely on Citizens Property Insurance Corp. So the private insurance companies can’t get the reinsurance in Louisiana they can get in other states, and, as a consequence, it’s more attractive to go to those other states. Here, as a company, you’re on your own. You’ll sell insurance, but at a higher rate. It’s no knock on the companies because they have to make a profit. It’s just not fair to their policyholders. You have to offer them [companies] a climate and incentives to make it worth their while.
4. If incentives are the answer, then why didn’t more companies take incentive-fund money when it was offered?
The only ones who could get it are new companies. We have plenty of companies here. What they do is, they restrict what they sell. State Farm tells their agents, “You can only sell so much. We can’t get too far out on a limb,” as does Allstate and many other companies. If you’re a good company and you want to do business in every state, you just may not sell much in every state. We try to attract new companies, and that’s just not the way to go. I’d rather offer incentives to Allstate and State Farm rather than try to entice some new company to come in.
5. Is Citizens on the right track since there has been a change in management, lawsuits and a deleveraging of policies after hurricanes Katrina and Rita?
The CEO of Citizens announces he wants to buy 16% up to 18% rate increase a few weeks ago. Charlie Crist, the governor of Florida, announced that the property insurance rates in Florida have dropped 16%. Whatever they are doing over there, they aren’t getting control of the cost of insurance. The rates are still outrageous.
6. The Legislature passed a cap on named-storm deductibles to take effect in 2010. How does that affect the state’s competitiveness?
No other state in the South has named-storm deductibles. That’s great, but why did they allow them in the first place? That gets us from the bottom on that one single issue up to where other states are. That’s not a huge victory.
7. How has Chinese drywall impacted the state’s insurance industry?
It’s a huge problem. The good news is, I put a pretty strong regulation in place in the late 1990s that really restricted the interpretation of policies as it applies to events like Chinese drywall. What the companies are saying is, “This wasn’t a foreseen immediate event, that it built up over a period of time and isn’t really an insurance problem.” I don’t agree with that.
8. What is the Insurance Department’s role in regulating companies that drop policyholders due to non-residence in their homes because of Chinese drywall?
The Insurance Department should step in and see that does not take place. If you get kicked out of your house because of a storm, then the insurance company pays your living expenses. In this instance, the Insurance Department should be very aggressive in protecting those policyholders.
9. How is the newly minted House health-care bill going to affect health-insurance premiums in the state?
I would like to think there would be an additional million people in Louisiana that have insurance, so those who pay in the private sector would not see any increase. I don’t think it’s out of the question that will happen.
10. Is your experience with federal prosecution an obstacle to your job as a commentator?
It hasn’t been because so many people believe I was wronged. If some people have a concern about it, that’s their problem. Obviously, if I’ve got one of the largely read columns in the state and a major radio presence, somebody must be listening or reading.
