The Insurance Incentive Fund bill is moved to the full house

BATON ROUGE, La. (KALB) — On Tuesday, Jan. 31, two days after the state’s special session on insurance began, lawmakers on the House Appropriations Committee sent both bills allocating $45 million to the Insure Louisiana Incentive Fund to the whole House Debate.

The sizable sum of money is intended to entice insurance companies to do business in the state, depopulate Louisiana Citizens, the state’s insurer of last resort, and potentially lower premiums. Louisiana Citizens enrollment has skyrocketed, and premiums soared 63% in January 2023, while several insurance companies defaulted or left the state altogether.

“This is not a silver bullet,” Louisiana Department of Insurance Commissioner Jim Donelon said in testimony from the committee Tuesday. “I’ve said that over and over again. I think it’s much more than a patch. I would call it a tourniquet to stop the bleeding and get us to the hospital.”

Donelon believes that if the funding were approved, an estimated 40,000 LA Citizens members could switch to a private insurer with lower premiums.

However, given lawmakers’ concerns about the impact the money might have on residents, no estimate has been made of how much those premiums might change.

“Does it make any sense how much this premium reduction means to our citizens if we enact this legislation?” asked Rep. Bill Wheat of District 73.

“I can’t give you a number,” Jeff Albright, chief executive officer of Independent Insurance Agents and Brokers of Louisiana, replied.

That was a worrying notion, as some lawmakers in southern Louisiana attested premiums in excess of $15,000 per year and questioned whether a drop in premiums would be significant enough to be affordable for both businesses and residents .

However, Albright and Donelon insisted the funding would create the conditions necessary to ease the burden on LA citizens and encourage more insurers to do business in the state.

Lawmakers also had concerns about making sure the right companies come into the state and that select companies don’t fail or go bankrupt if another natural disaster strikes the state.

To do this, Rep. Jerome Zeringue (R-District 52), chairman of the House Appropriations Committee and the state legislature carrying HB 1, has refined the safeguards outlined in the bill. For example, the only qualifying companies “must have a minimum AM Best financial strength rating of ‘B+’ or a Demotech financial stability rating of ‘A’. Any disallowed insurer applying for a grant under the Insure Louisiana Incentive Program must have a minimum Financial Strength 2 rating of AM Best ‘A’.”

These safeguards are further specified in HB 2 filed by Rep. John Stefanski (R-District 42).

Still, some lawmakers have bemoaned the size of the session and questioned whether funding the stimulus program is the right move. Conservative faction leader Rep. Jack McFarland (R-District 13) called the proposal a “band-aid” and suggested possible changes to the bill.

“We might invest the $45 million, but if the $45 million isn’t all used on time, you take the rest of the balance and put it into fortifying homes,” McFarland said, referring to the Fortify Homes -Program established in USA 2022 Regular Session and unfunded.

Legislators and the Louisiana Auditor’s Office agreed the program would help lower premiums for companies that offer rebates, but Rep. Mike Huval (R-District 46), a longtime insurance agent in southern Louisiana, said , it is a long-term solution and the incentive funds are not.

“A lot of insurance agents need that now,” says Huval. “You need this short-term help now.”

McFarland will be offering an amendment in the House of Representatives on Wednesday, February 1, to allow funds not used by the Insure Louisiana Incentive Fund’s June 30 deadline to be transferred to the Fortify Home Program. Currently, unspent funds would revert to the general fund, although Donelon believes they will use all funds.

It’s not clear if McFarland’s amendment would fall within the call.

Both HB1 and HB2 are scheduled to be debated in plenary on Wednesday.

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