La. Insurer Of Last Resort Handing Business To Private Sector

The Louisiana Insurance Department announced today that it has set up a process for private insurers to assume coverage of homeowners now protected by the state-created property insurer of last resort, Louisiana Citizens Property Insurance Corporation.

Arrangements for final transfer of policyholders, which should take place between May and June, were set at a March 14 insurance department meeting involving insurers who want LCPIC policyholders, referred to by the department as "depopulation insurers," insurance agents and LCPIC.

LCPIC is a nonprofit public corporation, statutorily designated a political instrumentality of the state, but is not legally a state department unit or agency.

Insurers involved in the discussion included those who are part of a grant incentive program to insure coastal homeowners and companies that are not, according to the department.

Commissioner Jim Donelon said the conclusion of arrangements "is great news for Louisiana since we will not only see competition among insurance companies for existing Louisiana Citizens policies, which will move the state toward getting out of the property insurance business, but we will also see competition for new property and casualty policies not currently held by Louisiana Citizens."

The department said the scheme established for the first round of the LCPIC depopulation process is as follows:

Between March 15 and April 15, the depopulation companies will work with agents to seek final agent approval on individual policies.

While agents may represent multiple depopulation insurers, they should not give approval to more than one depopulation company for any individual policy.

Agents should delete any policies that are duplicates and should not be taken out, or which do not meet underwriting criteria and should remain in Citizens.

On or before May 1, the depopulation insurer will provide LCPIC with their list of selected policies that have been approved for take-out by the agent.

Between May 1 and June 1 LCPIC will analyze the various lists and mark the agent-approved policies for take-out with the appropriate depopulation company.

Any policies with duplicate selections will be sent to the agent, with a copy to the companies, for determination as to which depopulation company should be the assuming depopulation company.

Prior to June 1, agents and policyholders will be formally notified of the assumption and subsequent nonrenewal by both the depopulation insurer and LCPIC. It is planned to accomplish this in a single mailing.

On June 1, LCPIC will issue Assumption Agreements to the depopulation companies covering the selected policies.

The Assumption Agreements will have a retroactive effective date of March 1. While LCPIC and its service providers will adjust claims until June 1, depopulation insurers will be responsible for reimbursement of losses incurred from March 1 until June 1.

New claims adjusted by LCPIC between March 1 and June 1 will be handled to completion by LCPIC with oversight by the take-out companies.

LCPIC will continue to renew policies on LCPIC paper until October 1, when depopulation carriers will provide renewals on their paper. Depopulation carriers will have access to the policies from June 1.

Insurance department requirements of companies in the incentive program should be met by Feb. 28, 2010. Future depopulation rounds will occur later in the year, the department said.

The announcement noted that agents will be making decisions for the policyholders when reviewing proposals from more than one depopulation company on insurance policies. They will discuss with depopulation companies such things as financial stability of the depopulation insurers.

The department said that while it is expected rates and forms will be at least as good as LCPIC, agents should have this discussion with the depopulation insurer.

A key issue in handling renewals will be insurance to value, and agents should evaluate any impact of insurance to value on renewal premiums.

The department said there will be a review of business methods of the depopulation carriers as well as acceptable agent contracts and compensation.

When the depopulation insurer begins to write policies on their paper it is expected they will handle these conversions as renewals; however, this should be reviewed with the depopulation insurer, according to the regulator.

It is the agent's responsibility to select the depopulation insurer, the department said, adding that while agents may represent multiple depopulation insurers, they should not select multiple carriers on the same individual policy.

Individuals who are now insured with LCPIC may contact staff with the insurance department, LCPIC, agent associations or depopulation companies if they have any questions regarding their insurance policy.