BATON ROUGE, La. (BRPROUD) — Over the last few months, thousands of Louisianans have lost their insurance policies as companies go under. The state Insurance Commissioner gave an update on what is being done to prevent companies from leaving.
Thousands are searching for new insurance carriers after six companies have pulled out of Louisiana recently. With the increase in natural disasters, some are finding it much harder to find affordable coverage.
“We are four times more often to get hit on a per capita basis than Florida or Texas,” Insurance Commissioner Jim Donelon said.
A new law will require companies to have $10 million in capital in order to do business in the state. This is a raise from the current $3 million requirement under law and the $6 million requirement that has been followed for years. Donelon said he hopes that will push companies to make better financial decisions.
“Our hope is it will make them more conservative when they go to the reinsurance market and buy their reinsurance and know that they have $10-million at risk as well,” Donelon said.
But the companies that went under would not have been saved with the $10 million due to their massive debt for reinsurance. Donelon said it would be hard to implement regulations on reinsurance minimums.
He blamed part of their issue on picking a more liberal Catastrophe Model when buying their reinsurance. The models predict the potential cost of natural disasters and how much the company could possibly pay. It is a program that has been around since the 80s and the technology is improving.
“They paid the price ultimately,” Donelon said.
For those who live below I-10, new legislation passed to give incentives for companies to insure people there due to the high risk.
“We have the legislation in place, without funding, to replicate that incentive for companies to come write a business in coastal parishes and specifically out of Citizens,” Donelon said.
One company offered to take some of the policyholders that were put on Citizens following the pullout of some of the companies. Now it wants an incentive since the legislature passed the incentive law. Donelon said he wishes they didn’t pass that law this year as thousands are on the pricey Citizens insurance with no other choice. Donelon suggested people shop around for a new policy they can afford and reminded people they have 60 days after their cancellation to find a new carrier.