As Florida strives to handle the problems that led to its present property/casualty insurance coverage disaster, one other hurricane-prone coastal state, Louisiana, is navigating its personal insurance coverage troubles.
The Louisiana property insurance coverage market has been deteriorating for the reason that state was hit by a file stage of hurricane exercise in the course of the 2020/2021 seasons, Triple-I says in a brand new Points Transient on the state’s insurance coverage disaster. Twelve insurers that write householders protection in Louisiana have been declared bancrupt between July 2021 and February 2023.
“Whereas similarities exist between the conditions in these two hurricane-prone states, the underlying causes of their insurance coverage woes are completely different in essential methods,” mentioned Mark Friedlander, Triple-I’s director of company communications. “Florida’s issues are largely rooted in a long time of litigation abuse and fraud, whereas Louisiana’s troubles have had extra to do with insurers being undercapitalized and never having sufficient reinsurance to face up to the claims incurred in the course of the record-setting hurricane seasons of 2020 and 2021.”
Insurers have paid out greater than $23 billion in insured losses from over 800,000 claims filed from the 2 years of heavy hurricane exercise. The biggest property loss occasions have been Hurricane Laura (2020) and Hurricane Ida (2021). The rising quantity of losses additionally drove a dozen insurers to voluntarily withdraw from the market and greater than 50 to cease writing new enterprise in hurricane-prone parishes.
This isn’t to say authorized system abuse is absent as an element within the Louisiana’s disaster – fairly the other, as highlighted by Insurance coverage Commissioner Jim Donelon’s cease-and-desist order, issued in February, in opposition to a Houston-based legislation agency. In line with Donelon, the agency filed greater than 1,500 hurricane declare lawsuits in Louisiana over the span of three months final yr.
“The scale and scope of McClenny, Moseley & Associates’ unlawful insurance coverage scheme is like nothing I’ve seen earlier than,” Donelon mentioned. “It’s uncommon for the division to challenge regulatory actions in opposition to entities we don’t regulate, however on this case, the order is important to guard policyholders from the agency’s fraudulent insurance coverage exercise.”
McClenny Moseley has since been suspended from follow in Louisiana’s Western District federal court docket over its work on Hurricane Laura insurance coverage instances.
A daily on the American Tort Reform Basis’s “Judicial Hellholes” listing, Louisiana’s “onerous unhealthy religion legal guidelines contribute considerably to inflated claims funds and awards,” based on a joint paper printed by the American Property Casualty Insurance coverage Affiliation (APCIA), the Reinsurance Affiliation of America (RAA), and the Affiliation of Bermuda Insurers and Reinsurers (ABIR).
“Insurers who fail to pay claims or make a written supply to settle inside 30 days of proof of loss might face penalties of as much as 50 p.c of the quantity due, even for purely technical violations,” the paper notes. “To keep away from incurring these large penalties, that are meted out pursuant to extremely subjective requirements of conduct, insurers typically really feel compelled to pay greater than the precise worth of claims because the lesser of two evils.”
On account of these converging contributors, Louisiana Residents Property Insurance coverage Corp. – the state-run insurer of final resort – has grown from 35,000 to 128,000 policyholders over the previous two years, based on the Louisiana Division of Insurance coverage.
Study Extra:
Louisiana Insurance coverage Regulator Points Stop & Desist Order to Texas Legislation Agency
Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies