Can Louisiana property insurance market meet demand without incentives?

Prior experience suggests offering incentives to write property insurance in Louisiana will lead to lower costs but may not be necessary to meet the demand, the Louisiana Legislative Auditor’s office says. 

The LLA report, released as lawmakers prepare to open a special session focused on insurer incentives, is “severely misleading” and understates the success of an incentive program implemented in 2008, Commissioner of Insurance Jim Donelon’s chief of staff says. 

Legislators will consider allocating $45 million from the state’s budget surplus to attract companies to write new policies and reduce reliance on the Louisiana Citizens Property Insurance Corporation, the state-backed insurer of last resort that by law must charge higher rates than the private market. 

The Insure Louisiana Incentive Program, if funded, would allow insurers with incentives to save consumers 45% to 57% compared to Citizens, the LLA says. But during the previous version of the program from 2008 to 2015, most new companies that entered the state didn’t get incentives, and 79.4% of the growth in premium volume was attributable to non-ILIP recipient companies. 

The LLA says lawmakers could address what many consider to be an insurance crisis by funding incentives for property owners to fortify their homes or spending $50 million to help Citizens boost its reinsurance or provide savings to policyholders; the latter option would require changing state law. 

The private market is not writing many new policies in south Louisiana and there is no reason to believe insurers will do so unless the program is funded, writes S. Denise Gardner, Donelon’s chief of staff, in response to the LLA report. 

“There is no alternative solution to this immediate problem,” Gardner says. 

You can read the LLA’s report and Gardner’s response here. The Daily Advertiser has a special session rundown here.