A bill that would not allow insurance rates in Louisiana to vary more than five percent between adjacent parishes passed a House committee last week and awaits action on the House floor. The National Association of Independent Insurers opposes the measure and maintains that if passed, the bill threatens to exacerbate the property/casualty affordability and availability crisis gripping the state.
“House Bill 2000 would create subsidies, and would not allow underwriters to accurately rate risks,” Greg LaCost, counsel for the NAII, said. “Rates should be allowed to fluctuate based on risk, or the likelihood of claims being issued, not on the basis of an arbitrary 5 percent figure.”
“Fluctuations occur in rates because fluctuations occur in risks on a region-to-region basis, even in contiguous parishes,” LaCost added. “Rates should be higher for coastal regions versus regions that are more inland. Other underwriting factors that can cause deviations in rates include: the proximity of fire districts to water sources, the density of trees in areas prone to windstorms, the availability of emergency services, rural versus urban settings, old structures without safety devices such as sprinkler systems versus newer construction, type of roads, among other reasons.”
Under the bill, neither the Louisiana Insurance Rating Commission nor any insurer may approve or set rates that vary more than five percent between adjacent parishes. The House Insurance Committee approved the bill in an 8-3 vote on May 8.
“Adjusting rates in this manner would only exacerbate the insurance availability and affordability crisis in the state, not abate it,” LaCost said. “The legislature should instead focus on reform packages that will modernize the state’s insurance regulatory system and encourage more insurance companies to enter the Louisiana market and write new business. HB 2000 could cause more insurance companies to leave Louisiana, further limiting economic development and business activity in the state.”
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