Katrina, Rita complaints breed probes in La.

As an aftereffect of consumer complaints, the Louisiana Department of Insurance hit Allstate Insurance Co. and St. Paul Travelers Cos. with investigations into their handling of homeowners’ claims resulting from Hurricanes Katrina and Rita. Upon completion of these reviews—said to take about three months—the department will examine the conduct of the high-risk homeowners coverage pool, Louisiana Citizens Property Insurance Corporation.

The reviews will likely examine how quickly the insurers settled claims, if their adjusters visited homes in a timely manner and how quickly they paid policyholders, according LDI spokeswoman Bobby Clark.

If it is found they did not act according to state law, the insurers could face penalties.

Louisiana Insurance Commis-sioner Jim Donelon said the department reviewed the number of customer complaints per company market share to determine what companies to investigate. Others could be scrutinized in the future.

The department received 1,287 complaints from Allstate’s customers. According to the Insu-rance Information Institute, All-state had 20.8 percent of market share for multiple peril homeowners in Louisiana in 2004. St. Paul had 3.9 percent of the market and 230 of its customers complained. LDI spokeswoman Amy Whit-tington said they received 1,011 complaints from Citizens customers, which holds about 7.6 percent of the market share.

Some 90 percent of the claims have been settled, according to the I.I.I., though critics say coverage has been shoddy, falling well below policy limits in many cases.

Kate Hollcraft, senior communication consultant for Allstate’s southern region, in a statement said market conduct exams by a state’s insurance department are appropriate and common exercises of its authority as a regulator. She said Allstate would fully cooperate and that it has settled more than 94 percent of their customers’ claims. She added that many of Allstate’s claims employees were personally impacted by the hurricanes and said the company continues to focus on recovery efforts.

Jennifer Wislocki of St. Paul Travelers’ Corporate Communications department said the company also plans full cooperation. She said the complaints received by the department with regard to this issue represent just 1.5 percent of all homeowners’ claims St. Paul Travelers received in Louisiana from hurricanes Katrina and Rita and that more than 95 percent of those have closed.

“They were just overwhelmed by the storms,” said Jeff Albright, chief executive officer, Independent Insurance Agents & Brokers of Louisiana. According to Albright, the majority of insurance companies had some problems with Katrina and Rita.

He called poor claims handling a fairly widespread problem on a relatively small percentage of claims—resulting in a large number. “When you’re talking about that many claims, a small percentage is still a significant number,” he said.

One common denominator, according to Albright, was the fact that almost universally, insurers outsourced their catastrophe claims response to independent claims adjusting firms with no dedication of capacity. Therefore, adjusting firms committed to more catastrophe claims handling than they could manage.

“The companies tried to hand it off,” Albright said, “and the people they handed it off to were just not capable of handling the volume of claims.”

More adjusters were hired, whom Albright described as inexperienced and unable to handle claims in the field. “There was a lot of shuffling of adjusters so that a policyholder could see up to six different adjusters as companies tried to allocate their resources,” he said.

Senator James David Cain, chairman of the Senate Insurance Committee, reacted to the investigations by saying, “I appreciate that the department has finally started to come around and now realizes that we have tremendous problems to solve. But this is too little and it’s way too late.”

As Cain sees things, the people of Louisiana face urgent problems and need immediate relief. “They should have begun an internal investigation of Citizens months ago. The state can’t afford to wait for some date that is to-be-determined in the future,” he said.

Cain noted that “[Citizens] is actually overseen by the Louisiana Department of Insurance. Therefore they would be investigating themselves.”

Senator Cain, who as Senate Insurance Committee chairman served on the Citizens Board, resigned earlier this year and appointed a designee, citing a lack of an audit by the Louisiana Legislative Auditor. Citizens is required to submit their financial records to the legislative auditor but has not done so.

“They haven’t gotten an audit of the financial documents on this corporation since its inception, even though the audit is required by law. We have no way of knowing if money was being mishandled. I simply refused to serve on a board that won’t provide basic financial information to their board members. They can’t expect people to serve on a board when the company won’t follow the law.” said Cain.

Cain said he would run for insurance commissioner in the fall. “I had a guy from a giant insurance company come into my office, he said, ‘Mr. Cain, I heard you may run for commissioner. I heard you may win.’ I said I probably would if I ran—which I am,” he said.

Topics Claims Louisiana Homeowners