How Bad Can Insurance Climate Get?

December 9, 2009

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Thursday, December 10, 2009

Baton Rouge, Louisiana

THE WORST OF TIMES FOR LOUISIANA INSURANCE

Remember ole’ Calypso Joe doing the limbo and singing in that deep voice…”How low can you go?”  Few would be surprised if they learned he was singing about that state of insurance affairs in Louisiana.   To many observers, 2009 cannot end quickly enough.  Each month of the year has produced more bad news for Louisiana property owners.  Rates have continued to rise and the Insurance Department has been mirrored in one law suit after another.  But November has proven to be the cruelest month.   Will the bad news for Louisiana policy holders get worse and will the bottom continue to drop out in 2010?

Just this week, new figures were released by the National Association of Insurance Commissioners that rated Louisiana as having the highest automobile insurance rates in the country with an average yearly cost of $1,262.00.  That’s some 25% above the national average. An even more disturbing figure shows that Louisiana also has the least affordable auto insurance costs compared to gross income.  Where the percent cost in most states averages around 3.5%, Louisianans pay 6.72 percent of their average income for automobile insurance.

And Louisiana drivers face even more bad news when a new law kicks in requiring more coverage on January 1.  Forty per cent of motorists who buy minimum liability coverage will see rates jump by at least 14%.  Insurance officials dismiss these high costs as not being that “out of the norm,” saying only 12% of Louisiana drivers are uninsured.

 Ask any cop on the traffic beat who pulls over drivers for traffic violations.  They will tell you the numbers are   much closer to 30%, and this figure has stayed consistent for a number of years. Yet the fact that driving a car has become unaffordable to many Louisiana drivers has received scant attention from both the Insurance Department and the legislature.  Aggressive enforcement action in other states has led to a crack down on uninsured drivers, drunken drivers, text messaging and cell phone using drivers and teenage drivers. The proof is in the pudding.  Rates are dropping throughout the country, but going up in Louisiana.

Louisiana is also being accused of dropping the ball in regulating the largest insurer operating in the state.  A.I.G., both directly and through re-insurance has a major presence in Louisiana selling various insurance products that directly affects thousands of Louisiana policy holders.  This column has written at length in the past about the financial shenanigans of A.I.G. and the dangers of too little regulation by Insurance regulators.

Lawsuits have been filed in a number of states, most recently in California, that would force A.I.G.  to keep readily available assets in the respective state when potential claims were likely to be made.  Louisiana law requires any insurance company operating in Louisiana to estimate future claims and set aside enough assets to honor them.  But if other states seize all the assets, Louisiana policyholders could be left out in the cold since no action is being taken in Louisiana by insurance officials.

The legislative auditor, charged with auditing all Louisiana state agencies, issued a highly critical financial review of the Louisiana Insurance Department in recent weeks.  Some $30 million dollars was handed out to five insurance companies to encourage them to sell more property insurance in Louisiana.  The concept of trying to buy off companies to sell insurance was questionable to begin with. But the whole matter was made worse in that no contracts were signed until six months after the money had been paid out.   Taxpayers were also stuck with a $500,000 bill for legal and auditing fees incurred by the Legislative Auditor to force the Insurance Department to hand over legally required documents.  All in all, a great deal of money wasted, and, of course, paid for by Louisiana taxpayers.

And then there is Citizens Property Insurance Company.   Created in 2003 by the legislature at the request of the insurance department, Citizens has proven to be the biggest financial disaster in the state’s history.  Rarely a month goes by when there are not more allegations of mismanagement.

Just last week, the legislative auditor stated that Citizens has “lax or nonexistent controls” over company assets.  Auditor Steve Theriot also stated that auditing Citizens “was like pulling teeth in some cases” to get basic financial information.  “We kept getting roadblock after road block,” Theriot also said he “questioned the reliability” of data turned over to his office from Citizens computer system.

Citizens is also fighting, and no doubt will lose, three class action law suits filed because of failure to pay claims timely and underpaying claims following Hurricane Katrina.  As the legal skirmishes go on, interest continues to run and Citizens faces potential liabilities of over $200 million. The only company that faces such exposure for failure to pay claims is Citizens, the state run company.  Private companies were able to follow the law.  So again, the big losers are the policyholders and taxpayers.

And while all these indiscretions and financial calamities were taking place at Citizens, the company continues to ask for more rate increases.  Hurricane season just ended with no storm activity. Cost of insurance is dropping all over the gulf south. Florida’s average property insurance rate dropped, according to Governor Charlie Crisp, by 16%.  Louisiana Citizens Insurance Co. recently asked for a 10% rate increase. 

After all the criticism of mismanagement leveled at Citizens, how did the company’s board of directors respond?  They gave their CEO a 5% raise bumping him up to $233,100 a year with a $1,500 expense allowance.  No wonder there have been a continuing stream of calls for Citizens to be abolished.

And the only good news out of the Citizens debacle is that there is a major effort being undertaken to do away with this state created company that has done so much harm to Louisiana taxpayers. Just this week, the Commission on Streamlining Government, at the urging of State Treasurer John Kennedy, unanimously voted to recommend that Citizens be dissolved.  The commission’s recommendations will be forwarded to Governor Bobby Jindal and legislative leaders next week.

Louisiana is at the bottom of most national lists compared to other states.  But a poor deep southern state having the highest insurance rates in the country for drivers, property owners, and in virtually every other category?  When it comes to setting legislative priorities for the Governor and the legislature in 2010, it should be a no brainer. Until the present insurance mess is cleaned up and rates begin to fall, Louisiana’s economy will continue to languish.

                                                                                          *****

When in charge, ponder….When in trouble, delegate….When in doubt, mumble.”                                     

 Dr, Jim Boren

 Peace and Justice. 

 Jim Brown  

jim Brown’s weekly column appears in numerous newspapers and websites throughout the south.  To read past columns going back to 2002, go to www.jimbrownla.com.  

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Dying King leaves Jordan

The Independent (London, England) January 27, 1999 | Robert Fisk Middle East Correspondent UNEASY LIES the head that wears a crown. Until last week, Crown Prince Hassan thought he wore one. Until yesterday, his enraged brother, King Hussein, might have expected a few more months upon the throne; but every Jordanian knew the significance of the monarch’s sudden flight back to America. The king is dying, his final battle with lymphoma cancer nearing its end.

Back in Amman – in a royal palace where shock is said to emanate from every face – Abdullah, the new crown prince and eldest son, is hourly expected to be made regent.

There is indeed something Shakespearean about Hussein’s departure. We may occasionally have made light of the Plucky Little King, but now he has disgraced the cosy, avuncular figure of his younger brother, Hassan, with a speed that would have been the envy of any Tudor. First there was the veiled criticism of Hassan in King Hussein’s television interview, then the failure of Hassan to show up at the airport for the king’s return from his “successful” hospital treatment in the United States. And then the sword fell. In his letter yesterday, published as the dying man was being taken back to the Mayo Clinic in Boston with a low blood count and “fever”, the King accused Hassan of plotting little less than a coup d’etat. His sins were already known, of course. In the King’s absence – while chemotherapy was turning his brother into a wraith on the other side of the Atlantic – Hassan tried to fire Hussein’s most loyal servant, Field Marshal Abdul-Hafez Mureii-Kaabneh, chief of staff of the Jordanian army. The word treachery was not used. But what other conclusion was the King likely to draw from the stories that had reached him daily from Amman? The newspapers in Jordan were starting to carry Crown Prince Hassan’s picture on every front page, on every day of every week. Flattering portraits of Hassan – a portly and unathletic figure at the best of times – flooded the country, with pictures (a dangerous precedent, this) of his own son. Although he spoke to the King many times daily by phone, his Pakistani wife, Princess Sarvath, never bothered to visit Hussein in his American clinic – even when the princess spent a month in Washington. Hassan clearly believed the King would never return to Amman. Did Abdullah – himself a lieutenant-general, an Oxford and Georgetown graduate and Sandhurst trainee – warn his father of what Hassan was plotting within the army? The word mutiny is darkly muttered in Amman. As commander of a special forces “counter- terrorism” unit, Abdullah must have known what was afoot. Or did the Americans, never fond of the stubborn Hassan, feed the King’s suspicions in his clinic? As for Queen Noor, the King’s present wife, we can only imagine her reaction. A strong-willed woman, she must have wished her own son, Hanza, to be crown prince. Yet it was widely believed in Amman that if Hassan had become king, Queen Noor would have left the country. For now, Jordanians are waiting for the fatal news from America. Only a week after they had welcomed back their monarch, he has departed. Sad stories of the death of kings do not come easily to a nation that has been ruled by one monarch for almost half a century. And Crown Prince Abdullah – how strange it seems to use those words – must know that perfidy lurks along his borders. Will Israel, which sent a murder squad to the streets of Amman after Hussein’s peace treaty with Israel, resist the temptation for intrigue? Will President Saddam Hussein, who has also sent his assassination experts to Amman, leave the young crown prince in peace? What will President Assad – grooming a son for his succession – feel for the parachutist prince who will soon rule Jordan? They all know that Abdullah already commands a special intelligence unit and a public security brigade. Hitherto he has spent his time countering Iraqi smuggling and what he once called “terrorist infiltrations” from Syria. Now that will be the least of his troubles. go to web site feed the king website feed the king

Robert Fisk Middle East Correspondent


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