Senate Bills Reportedly Increasing Choice, Lowering Premiums in La. Passes Committee

April 25, 2003

A Senate panel this week approved two major bills that would reportedly change the way insurance rates are regulated in Louisiana, bringing more companies and competition into the state.

The measures, Senate Bill 721 and SB 245, passed the Senate Insurance Committee, and now head to the Senate floor.

“Both bills are a giant step in the right direction,” said National Association of Independent Insurers (NAII) Counsel Greg LaCost. “Either of these measures would greatly increase the availability of insurance in the state. Modernizing Louisiana’s rating system will result in consumers having more companies and
policies to choose from.”

SB 721 and SB 245 would both provide more flexibility in the rate-making process. Currently, insurers must obtain prior approval on all rate changes from the Insurance Rating Commission. The long delays in the approval process and artificially suppressed rates have resulted in many companies deciding that they simply cannot do business in Louisiana, said LaCost.

“Currently, the insurance availability problem is limiting economic development and business activity in the state,” continued LaCost. “This lack of competition among insurers is a significant factor in Louisiana’s higher than average insurance rates.” Louisiana posts the second highest average homeowners insurance rates in the nation-second only to Texas, according to NAII data.

“Flexibility in rating would serve as an incentive to bring more insurance companies back to Louisiana,” said LaCost. “More companies in the state means a greater variety of products and prices, giving consumers greater choices, better service and better rates than found in highly regulated markets.”

SB 721 would allow insurance companies to raise or lower rates by up to 10 percent within a year without appearing before the Insurance Rating Commission for approval. The Insurance Rating Commission actuarial staff would still review the rate adjustments and determine if they are reasonable. Rate changes exceeding 10 percent would still require approval by the Department of Insurance as well as the rating commission.

SB 245 would enable insurance companies to file a rate change and then use the adjusted rate within 30 days. Insurers would be able to file rate changes twice a year, under the so-called “file-and-use” system. Under the bill, the Insurance Department’s property and casualty division would have the regulatory power to approve rate changes. The Insurance Rating Commission would then become the appellate body to review decisions by the insurance department.

Both SB 721 and SB 245 are part of a legislative package supported by the Coalition to Insure Louisiana, a broad-based group of business and professional organizations that includes the NAII.

Also, SB 56 was amended to ban the use of credit-based insurance scores in the underwriting and rating of insurance policies, and passed the Senate floor.

“Insurance scores give a more complete picture of the risk of loss based on an objective, unbiased analysis of a person’s past financial behavior,” said LaCost. “Restricting the use of credit data presents a real danger that consumers who are able to find low priced insurance protection today will not be able to find that insurance tomorrow.”

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