Louisiana’s property market appears to be on the verge of going to hell in a hand basket. After two back-to-back disastrous hurricane seasons, many agents are worried and frightened, searching in vain for markets to place property risks. Compounding their problems legislation has been proposed that, if passed, is likely to make matters worse, instead of better, causing Louisiana’s property market to morph into the disaster that Florida’s already is.
Appearing on a panel at the LDI Symposium 2022 March 8, Ryan Daul, USI–Daul Insurance, said, “The only good thing about the property market being so bad is that it makes auto rates not look so bad.”
The panel was charged with discussing agents’ hot button issues.
Even though Daul mentioned Risk Rating 2.0 as a hot button issue for property/casualty agents, the panel discussion largely centered on property insurance availability and affordability in the aftermath of hurricanes Laura, Delta and Zeta in 2020 and Hurricane Ida in 2021. “I think the big question is: How are people going to afford insurance in our area? (Followed by:) What are we going to do to help them?”
Joining Daul on the panel was IIABL CEO Jeff Albright who said that the last two years on the property/casualty side of the insurance business have been “to hell and back.”
Albright has been in the insurance business over 40 years and with the Big I about 34 years. He said he has never seen “this much loss over such a wide area of the state. The property markets are worse now than at any time in my career. It is awful. And the legislature has so many bad bills in it. If they enact even a few of those, the market is going to get worse rather than better.
“For the first time in my career, I am afraid to be in the insurance business in Louisiana. We better get our heads up and be on top of this because it is a scary, scary situation,” Albright said.
He believes agents have learned a lot from all of the storms; he finds that agents are doing a better job. They learned a lot from Katrina and Rita. “Our agents had over 650 E&O claims out of Katrina and Rita – over $35 million in E&O paid losses. It was a disaster after the disaster that nobody talks about.” By comparison, after the storms of the last two years, “we have had one E&O claim,” Albright said.
Agents have learned a lot of lessons, and they are doing better than they have ever done, but “they can only do as good as the markets allow them to do.”
When he arrived at the meeting, Donelon told the audience that he believes this is the most important (legislative) session of his tenure—more important than post Katrina. “We had challenges with Sen. Julie Quinn leading a delegation to Florida and wanting to copy Florida, and that would have destroyed us as it has destroyed Florida.” He said the Louisiana Bankers Association is as concerned as LDI and is very supportive of the insurance market.
Daul spoke favorably about SB 162, the Policyholder Non-Renewal Protections bill, which prohibits an insurer from canceling or nonrenewing an insurance policy providing coverage for property until 90 days after the property has been repaired. Agents ran into difficulty placing damaged property after the property policy was nonrenewed. The result was that the insured had nowhere to go because no one wants to write insurance on a damaged building.
As Albright explained, one of the challenges after a storm is that the insurance market tends to contract. Reinsurance prices go up, and capacity is diminished.
There have been a number of nonrenewals on policies that cover damaged property. Louisiana Citizens can write some of that business, Albright said, but there are two problems. One is that on individual large accounts Louisiana Citizens will only write a building up to $10 million. Buildings of $15 million, $20 million, $30 million or $50 million, Louisiana Citizens can’t write. The residual market doesn’t have capacity to write it, and nobody in the voluntary market is going to write it, so there is no place to get coverage.
Solving that problem is the intent of SB 162, according to Albright.
He is sure the bill will not find favor with insurance companies, and “we need to do everything we can to make ourselves attractive to insurance companies.” So, there are negotiations going on, and “we will do our best to try and find a reasonable compromise somewhere in there,” Albright said.
According to Albright, there are several bills that require insurance companies to pay claims within a specified number of days of the storm. He used Hurricane Ida to explain the problem with the bill. Ida resulted in 450,000-plus claims. “There are not enough claims adjusters in the universe to rush in here and settle all those claims within 90 days to 120 days. It is impossible,” he said. “As agents, we want our claims settled as quickly as possible, but you cannot legislate beyond reality.”
Albright indicated that agents believe HB 280, Catastrophe Response Plan Improvements, is a positive bill that will not be burdensome on the industry, other than “they obviously need to have plans in place.”
He pointed out that after Katrina and Rita (2005) most of the major national companies pulled out of the homeowners market in Louisiana. Only a handful of major national AM Best-rated companies were left writing homeowners in the state. There are companies that have some legacy policies on the books, but they haven’t written a new policy in years, he said. The void in the marketplace has been filled by about 25 or so small specialty Demotech-rated coastal homeowners carriers that reinsure between 90 percent and 95 percent of their risk.
As he described it, those insurance companies are “tiny little entities” that usually operate in two or three states. Usually they operate in Louisiana, Florida and maybe South Carolina, maybe two or three other states. Their staffs are tiny; most have only 15, 20, 25 people on their entire staff.
When there is a catastrophe in Louisiana, State Farm can bring people in from all over the country. Allstate can bring people from all over the country. These little Demotech-rated carriers don’t have people all over the country. “They only have two or three people on their company roster that handle claims. They outsource to third-party adjusters. The third-party adjusters are overwhelmed, because they have contracts with several companies. So making everyone have a plan and have that plan well thought out, we think is a great start.”
Another bill that the commissioner is working with agents’ groups on is a standardized disclosure that the LDI will promulgate and insurers will distribute after a claim, according to Albright. The disclosure will explain several aspects of property insurance.
Albright explained the challenge of being an agent. “When people buy insurance, they want cheap, and when there is a claim, they want full coverage.” That is an impossible place to be, he said.
Agents know that they can explain coverage to their clients, but agents cannot make clients understand coverage. “We give them a policy that we know they are not going to read,” he said.
Most policyholders get used to the billboard lawyers telling them, “Don’t take any money until you hire me,” and that is not the way a property claim works. Now, they have a claim and will pay attention to the information. “We think that is a positive thing we can do to help,” Albright said.
Along those lines, Donelon talked about his own claim when a pine tree fell on his house during Hurricane Katrina. Donelon’s wife was dealing with the claim, and at the time, Donelon was LDI’s chief deputy. His wife called him at the department and asked, “Did you know we have a two percent named storm deductible on this policy?”
“No, I don’t,” Donelon said. “The neighbor down the block is our agent, and I am sure he explained it to me and told me we could save money. So, I took the option of self-insuring,” he said. “I said ‘okay,’ but most (claimants) don’t say ‘okay.’”
On the health side of the insurance business, Ronnell Nolan, who represents Health Agents for America, wanted agents to know about commission transparency.
On Dec. 27, 2021, the law kicked in that requires health insurance companies, agents and brokers to disclose their commission. “We don’t know all the rules and regs yet,” Nolan said. One health company said it will disclose commissions, while another said it will not; instead, it will make the agents do the disclosure, she explained.