La. Leads Way in Lloyd's Settlement
Session Brings Insurance Rates to Forefront
Final Review Comes Out on Pollution Exclusion
LDOI Online
The Louisiana Department of Insurance has entered cyberspace with its new World Wide Web home page, LDOI Online.
"The real benefit of this site is that it offers information to all segments of the industry," said Insurance Commissioner Jim Brown.
For example, the consumer who needs practical information right away can find Departmental publications such as the "Consumers Guide" to purchasing auto & home or life & health insurance, the "Auto/Home Rate Comparison Guide," and the "Hurricane Preparedness Guide." All of these publications are available for browsing, downloading or printing from the Internet.
"Some people, unfortunately, are unfamiliar with what we do and how we work at the Department," Brown said. Through LDOI Online, these people can get basic information, like the Department’s mission, organization and key personnel.
Media and insurance industry personnel now have immediate access to a six-month backlog of news releases as well as the "Louisiana Insurance Update," the Department’s international industry newsletter. LDOI Online also showcases links to various insurance- and health-related sites on the Internet, including the home pages of the National Association of Insurance Commissioners, the Health Care Financing Authority, and the Federal Emergency Management Agency.
"LDOI Online is really a front line of public information," Commissioner Brown said. "When people need insurance information right away, especially after hours, this is the first place they should look."
Future plans for expansion include an E-Mail center with information request forms for 24-hour public and insurance industry access, on-line applications for agent and company licenses, and the 1996 version of the "Auto/Home Rate Comparison Guide."
E-Mail letters with questions or comments can be sent to the department at public@ldi.state.la.us. LDOI Online’s Web address is ../images.
Dear Friends,
In a statewide primary on Oct. 21, 1995, I was re-elected as Louisiana’s Commissioner of Insurance. This is a mandate I take very seriously, and I am already acting on it.
We at the Department have worked hard over the last four and a half years to change the insurance industry’s perception of Louisiana, and our work is paying off. We have cracked down on crooked companies, shut down 21 failing insurance companies, and made more than 160 referrals that led to indictments of individuals involved in troubled insurance companies.
And we will not back off this term; we will continue to fight the good fight.
I am especially concerned about hurricane insurance. A major portion of the insurance industry has made the decision to get out of the property insurance business in most of South Louisiana due to the threat of hurricane damage.
I am proposing that the insurers continue to provide property insurance in the affected areas, with what I call a “wraparound” policy. Under this proposal the insurers would continue to write traditional property insurance policies except for wind and hail coverage.
That coverage would be provided through risk pools, knows as the FAIR Plan and the Coastal Plan. Even though the coverage would come through two policies, they would both be available and serviceable by a consumer's existing agent.
Another area which I am working in is making sure the people of this great state get fair insurance rates.
There’s no easy solution to lower insurance rates in Louisiana, but now, Gov. Foster, with the help of the Legislature, has brought the problem to the forefront.
The groundwork has been done by the Department of Insurance to bring the reform and stability to insurance regulation in Louisiana necessary to lower insurance rates. Rates are beginning to come down. The trend is there, but much more needs to be done.
Sincerely,
James H. "Jim" Brown
Commissioner of Insurance
Insurance Commissioner Jim Brown applauded a decision by securities regulators in nine states to call a "cease fire" in legal battles with global insurer Lloyd's of London.
Louisiana was the first state to reach such an agreement with Lloyd's, an agreement that is critical to the protection of hundreds of thousands of Lloyd's policyholders throughout the United States.
"We were rapidly moving toward a crisis situation with state securities offices in numerous states initiating legal action," Brown said. "This potentially could have caused a ‘run on the bank’ at Lloyd's, and destroyed any chance of allowing Lloyd's to solve its worldwide problems.
"I think Louisiana acted as a catalyst for regulators in other states to try to reach a settlement in a dispute that has the potential of toppling Lloyd's."
The nine states have cases against Lloyd's alleging securities fraud and other violations in the company’s recruitment of U.S. investors in the 1970s and 1980s. Brown said he favors a settlement that would leave the 300-year-old institution of Lloyd's intact. Otherwise, the dissolution of the financially-troubled giant could trigger a global insurance crisis.
Louisiana would be particularly hard hit by the failure of Lloyd's. Insurance and reinsurance (insurance bought by other insurers to spread around the risk) would be in short supply for high risk coverage such as oil rigs, Mardi Gras parades, and refineries, Brown said.
"This state has one of the highest concentrations of high risk enterprises in the country, but the demise of Lloyd's would be felt worldwide," Brown said. Brown's decisions to come to an agreement with Lloyd's does not represent any effort to side with Lloyd's in its disputes with its investors. "This is an effort to protect policyholders in every state in this country, and responsible regulators must seek solutions to this very serious crisis we face." The Louisiana Department of Insurance and the Office of Financial Institutions reached an agreement on March 19 to begin negotiations with Lloyd's.
The Commissioner commends the governor and the state Legislature for their efforts in bringing to light the complicated issue of lowering insurance rates.
"I am excited about Gov. Foster and the Legislature’s efforts to bring to light the complicated issue of lowering insurance rates," said Commissioner James H. "Jim" Brown.
He said he worked during the Legislative Special Session to advise members of the legislature and the governor on wise steps of action to take in this matter.
Gov. Mike Foster’s original proposal was a no-fault plan, which reduce car insurance rates for those who gave up their right to sue for pain and suffering. However, this bill was defeated by the Senate and was replaced by House Bill 196 (HB196). This bill became knows as a "no pay, no play" bill.
The original bill involved things like not allowing uninsured motorists to recover damages for pain and suffering, and a 10 percent reduction in bodily injury liability insurance issued in the state.
Also, the Louisiana Automobile Insurance Cost Reduction Commission would have been created within the Department of Insurance to undertake a study of alternatives for the reduction of insurance costs.
The legislation would have changed the amount of time uninsured motorists have to get insurance after they are ticketed.
"One area of this legislation that I was really excited about was the creation of a committee to study the reduction of insurance rates," Brown said.
The "no pay, no play" bill was vetoed by the governor.
The Governor said he felt the bill was a hodge-podge and would not accomplish his goal of lowering insurance rates. However, he said he is still interested in setting up a committee to study the causes of high insurance rates in our state, and how to prevent them from occurring.
"Reducing rates may not be easy, but we are going to take a hard look at this state and what is causing high insurance rates in it," Brown said.
Some of the causes we know about are young, uneducated drivers, drunk drivers, and uninsured drivers.
Louisiana’s absolute pollution exclusion (APE) review is nearing completion, and the verdict appears to be: If it does not "pollute," a company cannot refute claims coverage.
That is, if an incident does not result in "environmental damage," it is not a pollution incident, and any otherwise valid claims resulting from that incident must be paid by the insurer.
"To interpret the APE otherwise is inconsistent with its purpose, eviscerates general liability coverage, and defies the reasonable expectations of policyholders," said Commissioner of Insurance James H. "Jim" Brown.
In 1994 the APE came under review by the Louisiana Supreme Court, which found that the language used in insurance policies excluding coverage for "pollution related" losses was too broad.
As a result, the Louisiana Department of Insurance hosted a forum last year to rewrite the APE. Representatives from major state and national insurers attended the public hearing.
"We were particularly concerned about the use of the exclusion to thwart home-owners and personal auto insurance claims," Brown said.
"There was a great deal of potential for abuse in those areas."
In discussing the applicability of the APE to various claims, the well-known example of the "slip and fall in bleach" was used. Most insurance companies agreed that if a person suffers a broken arm in such an incident there should be coverage, but if the injury is a chemical burn then the carrier is justified in denying coverage.
This assessment, however, is wrong.
When the Insurance Services Office first established the APE in the mid-1980s, in the wake of the chemical pollution problem at Love Canal, New York, it also submitted a buyback policy to restore the coverage carved out by the exclusion.
The buyback policy, however, covers bodily injury and property damage resulting only from a "pollution incident:" any escape of pollutants into the environment, provided that such escape results in "environmental damage."
"When the ISO package was presented to regulators, it was represented that the buyback restored the coverage excluded by the APE," Brown said. "It was not represented that the buyback was more limited in scope than the exclusion."
Thus the APE cannot be read to exclude coverage for a chemical burn resulting from a slip and fall in bleach in a store since there was no "environmental damage" and thus no "pollution incident."
"We have been concerned for some time that the overly expansive definition of pollution has had a negative impact on small businesses that pose no risk whatsoever to the environment," Brown said.
"Naturally, our final intent was to be fair to both the policyholders and the industry. And in the end, we think we succeeded."
A study of the financial impact of newly passed tort reform laws on insurance rates has been commissioned by Louisiana Insurance Commissioner Jim Brown.
The study, to be conducted by the actuarial firm of Tillinghast - Towers Perrin, was announced at the May meeting of the Louisiana Insurance Rating Commission which approved a list of insurance rate increases.
Brown, who by virtue of his elective office chairs the Rating Commission, proposed delaying any vote on rate increases until the results of the study were complete. However, a majority of the members of the commission voted in favor of granting a long list of rate increases including a 4.5 percent increase for State Farm Mutual Insurance Company.
Six members of the Rating Commission are appointed by the governor, Brown votes only in the case of a tie. Gov. Mike Foster promptly fired the majority of the members of the commission who acted against his wishes in voting for the increases. Before the vote, Brown reiterated that neither he nor Foster favored any rate increases.
Brown and the Insurance Rating Commission agreed that any rate increases adopted at the meeting would be subject to a roll-back if the results of the study indicated it was warranted.
"I have never seen a governor involved in insurance rates like Foster," said Brown.
New rate guide offers consumers a place to start shopping when comparing automobile and homeowners insurance prices. The 1996 Auto/Home Rate Comparison Guide lists the top 20 companies in the state by volume. The guide gives consumers an opportunity to compare automobile and homeowners rates in one easy step.
"This is one of the most popular publications we put out," said Commissioner James H. "Jim" Brown. "Each year we have been trying to expand it to meet consumer needs."
The automobile examples given in the guide are for a married male, a single female, and a single male, each with varying insurance track records. All of the automobile examples are on a 1995 Pontiac Grand Am and for liability insurance.
The section on homeowners insurance gives rates for a frame construction home worth $60,000 and for a brick construction home worth $70,000.
These examples were chosen because they vary and can be used as a guideline only, Brown said. To find out more about these rates contact the company.
It is important that consumers remember that this guide should not be the only source used to make decision about auto or home insurance, Brown said. There are other companies who are not listed which provide adequate coverage as well.
"We understand price is important to you, but it should not be the only factor you use in deciding on a policy," Brown said.
When a consumer finds a policy they are interested in, they should check out the company before making a purchase.
Copies of the rate guide are free and can be requested by calling the Department’s toll-free number, 1-800-259-5300 or 5301, or in Baton Rouge at 342-5317.
"The Department is here to help with rate questions, but we can also answer other questions consumers, agents and companies have about insurance," Brown said.