Possible Fix for Louisiana's Insurance Crisis on the Horizon

Insurance Commissioner Tim Temple laid out changes to Louisiana insurance regulations that would allow insurers to raise rates more easily, increase profits and self-report some violations in an effort to help steady the floundering market.

Some of the proposals are currently in the works, while others will need the approval of the Legislature in the next session to take effect. Temple’s plan to cut back on regulations would make the state's insurance market friendlier to companies— all in the hopes of attracting competitors and eventually lowering rates for residents.

“Louisiana has a very heavy-handed regulatory reputation,” said Temple, a former insurance executive who took office in January after running unopposed. “We’re changing that.”

Temple's plans, outlined during a news conference Monday, are likely to spark the already contentious debate about insurance in the legislative session that begins next month.

The depth of the crisis isn't debatable. After devastating hurricanes in 2020 and 2021, 12 insurance companies went belly-up and left Louisiana. Homeowners took the brunt of the hit after experiencing soaring coverage premiums.

Citizens, the state-run insurer which must charge more than the private market, has grown by 94,842 policies since Ida, a 244% jump. While data isn't available for the private market, the average annual cost of a Citizens policy has risen to $4,600, up nearly $3,000 since Ida.

Temple is advocating for an end to the “three-year rule,” which bans insurers from dropping customers if they had been with the insurer for three years. Originally created for consumer protection, Temple said he is not aware of another state that has such a requirement.

He has already lifted profit caps on insurance companies, allowing them to collect as much profit as they want. Temple argues that customers can choose not to do business with a company charging too much.

Temple praised the Legislature’s decision last year to allow companies to raise rates more than once a year, and plans to allow companies to self-report “minor” violations to avoid fines from the department, as long as the violation didn’t harm a consumer.

“Insurance is a free market,” Temple said. “The legislation we’re bringing...it’s not experimental.”

While overall the proposed rules aim at reducing regulation, Temple suggested he'll take aim at “thinly capitalized” insurers who write cheap insurance, sometimes by taking huge batches of policies from Citizens. He said he will analyze the reinsurance agreements held by the companies to make sure they have enough protection in case a storm hits.