Louisiana Coalition: An Act To Follow

During the past decade, the number of companies offering property coverage in Louisiana declined from roughly 120 to less than 20–and few of those remaining are writing new policies. Louisiana boasts the second highest average property premium in the nationsecond only to Texas. Repeated attempts to move the state from a politically driven regulatory system to a more competition-driven system had failed, most recently in 2001.

Louisianas situation is not unique. Other states are experiencing similar conditions. Those states with regulatory systems that foster a competitive insurance environment tend to roll with the punches of a periodically turbulent market. Prices may increase as loss costs rise, but the fundamental health of the market and the widespread availability of insurance to consumers at a sound rate are not jeopardized.

Market crises are born when difficult business environments coincide with burdensome regulatory schemes. In these cases, insurance regulation is not based on market conditions, but politics. Thats been the case in Louisiana for some time. The difference this year is the approach insurers took to address the problems.

After several unsuccessful attempts to reform the states rate regulatory system on its own, insurers realized they would have to involve other business and consumer groups if legislators were going to muster the courage it would take to support a competition-based regulatory model. Early this year, NAII moved to form the Coalition to Insure Louisiana.

The coalitions first order of business was to reach out to other business and professional organizations and explain the nature of the problem, their stake in the outcome and NAII's proposed solution. The coalition proposal featured a package of bills to reform the rate regulatory system, the judicial system and the funding of residual market plans that would result in more insurers writing more policies in the state, increasing competition and consumer choice.

Insurance agents, the industrys best consumer advocates, quickly signed on to the coalitions pro-competition platform. Realtors, automotive groups, building contractors, oil refiners and other industry groups also became members of the coalition, creating a formidable political alliance that generated widespread support for its legislative package from public policymakers across the state. The result was the passage of regulatory reform proposals during the 2003 session.

The coalitions paramount message–when companies compete, consumers benefit–was well received by major newspapers, radio and television stations across the state.

The success of the Coalition to Insure Louisiana was important not just for companies and consumers in the Bayou State. Insurers can and should use the coalition concept in other states and on other issues. For instance, a similar group, the Coalition to Insure Auto Competition, has helped win enactment of reforms to New Jerseys beleaguered auto insurance market.

In addition, with Congress taking a closer look at states progress toward modernizing regulatory systems, Louisiana can stand out as a shining example of the positive strides states can make without federal intervention.

Robert Zeman is senior vice president of the Des Plaines, Ill.-based National Association of Independent Insurers.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 1, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.