A.M. Best

Insurance Lobbyists in Louisiana Face Battle Over Use of Credit Info

BATON ROUGE, La. 04/01/2003 (BestWire)-Two bills that would ban or restrict insurers' use of credit information are among the battles for insurance lobbyists as the Louisiana legislative session began March 31.

The language of the bills--H.B. 53 and H.B. 58--is similar, said Greg LaCost, counsel for the National Association of Independent Insurers. Both state that it's an unfair business practice to use a credit report or credit-based insurance scoring to terminate or modify vehicle or home insurance coverage, or to refuse coverage to a consumer.

Bills that would restrict insurers' use of credit information aren't new to Louisiana, LaCost said. "The last four years there've been credit bills that were in essence prohibitions," he said.

The Legislature will also see a bill on credit-based insurance scoring that's patterned after the model approved last fall by the National Conference of Insurance Legislators, which LaCost described as "reasonable." He said another bill has some of the NCOIL provisions, plus additional restrictions.

NAII will also be involved in trying to address an availability problem in Louisiana, La Cost said, and has joined a newly created group, the Coalition to Insure Louisiana, to push several bills to modernize insurance regulation in the state. The coalition includes insurer groups, individual insurance companies, businesses and professional organizations.

Louisiana requires prior approval of rates--one reason LaCost said insurers find it difficult to do business in the state. "Extremely high" loss costs and rigorous statutory requirements of the FAIR Plan also make the environment tough to make a profit, he said.

A regulatory-modernization bill passed the Louisiana Legislature two years ago but was vetoed by the governor, he said. "He thought it would spike rates, perhaps not realizing how the competitive marketplace would respond," LaCost said.

As a compromise, the coalition is looking at legislation calling for file-and-use and/or a flex-rating band, he said. A rate increase of less than 10% would be filed with the insurance department and used. Anything above 10% would have to be filed with and approved by the Louisiana Rating Commission.

"Whether it's above or below 10%, it has to be actuarially sound," LaCost said. "You can't just make up a number."

The flex-rating band has worked in South Carolina, where the number of insurers has doubled, the residual market has plummeted, and prices have gone down over the past few years, LaCost said.

Louisiana's FAIR Plan and Coastal Plans, the state-run residual-market plans of last resort, also make it costly to do business in the state, he said. The state could be more competitive if the FAIR Plan is allowed to provide self-sustaining rates, retain a reserve for possible catastrophes and avoid large assessments against companies each time a hurricane occurs.

These are a few of the legislative objectives for the coming year to change a market where "auto and homeowners writers have not made a profit for at least five years," LaCost said. Personal-lines loss costs are rising faster than the average premium, and premiums aren't adequate to reflect losses because insurers can't get rate filings approved on a timely basis, he said.

Before Hurricane Andrew struck in 1992, there were 86 writers of homeowners insurance in Louisiana, LaCost said. Now there are fewer than 10 writing south of Interstate 10, in the southernmost part of the state, he said.

(By Dennis Kelly, Washington bureau manager, BestWeek: Dennis.Kelly@ambest.com)