Special Session: Insurance incentive fund bill moves to full House

BATON ROUGE, La. (KALB) - On Tuesday, Jan. 31, two days into the state’s Special Session on Insurance, lawmakers on the House Appropriations Committee sent both bills on allocating $45 million to the Insure Louisiana Incentive Fund to the full House for debate.

The substantial sum of money is intended to entice insurance companies into doing business in the state, depopulate Louisiana Citizens, which is the state’s insurer of last resort, and potentially lower premiums. Louisiana Citizens has surged in its number of enrollees and premiums rose 63% in January 2023, all while several insurance companies have become insolvent or left the state altogether.

“This is not a silver bullet,” said Louisiana Department of Insurance Commissioner Jim Donelon in committee testimony Tuesday. “I’ve said that over and over again. I do believe it’s much more than a band-aid. I’d call it a tourniquet so that it will stop the bleeding and get us to the hospital.”

Donelon believes, if the funding were approved, an estimated 40,000 LA Citizens enrollees would be able to move to a private insurer with cheaper premiums.

However, amid concerns from lawmakers regarding the impacts the money could have on residents, no estimate was provided on how much those premiums could change.

“Is there any sense in how much that reduction in premiums may be to our citizens if we enact this legislation?” asked Rep. Bill Wheat of District 73.

“I can’t give you a number,” replied Jeff Albright, chief executive officer of Independent Insurance Agents and Brokers of Louisiana.

That was a worrisome idea, as some South Louisiana lawmakers attested to premiums exceeding $15,000 per year and questioned if a drop in premiums would be significant enough to be affordable for both the companies and residents.

However, Albright and Donelon insisted the funding would create the necessary conditions to alleviate LA Citizens and encourage more insurers to do business in the state.

Lawmakers also had concerns about ensuring the right companies would be coming into the state and that selected companies would not fail or become insolvent if another natural disaster struck the state.

For that, Rep. Jerome Zeringue (R-District 52), chair of the House Appropriations Committee and the lawmaker carrying HB 1, has honed in on the safeguards outlined in the bill. For instance, the only qualifying companies must have “a minimum financial strength rating of AM Best ‘B+’ or 26 a Demotech financial stability rating of ‘A.’ Any non-admitted insurer applying for a grant pursuant to the Insure Louisiana Incentive Program shall have a minimum financial strength 2 rating of AM Best ‘A.’”

Those protections are further established in HB 2 filed by Rep. John Stefanski (R-District 42).

Even still, some lawmakers have bemoaned the scope of the session, questioning if funding the incentive program is the right step to take. Conservative Caucus Chairman Rep. Jack McFarland (R-District 13) called the proposal a “band-aid” and has suggested potential amendments to the bill.

“Maybe we do put the $45 million in, but maybe if the $45 million isn’t all utilized in a timely manner, you take the remaining balance and put it into fortifying homes,” said McFarland, referencing the Fortify Homes Program established in the 2022 Regular Session and left unfunded.

Lawmakers and the Louisiana Auditor’s Office agreed the program would help lower premiums for companies offering discounts, but Rep. Mike Huval (R-District 46), a long-time insurance agent in South Louisiana, said it is a long-term solution and the incentive fund is not.

“A lot of insurance agents need that now,” said Huval. “They need that short-term help now.”

McFarland will offer an amendment on the House floor Wednesday, Feb. 1, looking to have any money not used by the June 30 deadline of the Insure Louisiana Incentive Fund be transferred to the Fortify Home Program. Currently, unspent money would fall back into the general fund, though Donelon believes they will utilize all the funds.

It is not clear if McFarland’s amendment would fall within the call.

Both HB1 and HB2 are scheduled for debate before the full House Wednesday.

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