Louisiana legislators ‘skeptical’ of Donelon’s homeowner’s insurance fix

By: - January 19, 2023 4:58 pm
Damaged homes in Chauvin, Louisiana, after Hurricane Ida

Debris sits outside of Chauvin homes after Hurricane Ida. The six candidates running for Louisiana governor will have to tackle the state’s insurance crisis if elected. (Photo by Rachel Mipro/Louisiana Illuminator)

Several Louisiana legislators said they aren’t yet prepared to fund a homeowners insurance incentive program backed by Insurance Commissioner Jim Donelon, even if Gov. John Bel Edwards calls them into a special session in early February.

“I think the House is skeptical of everything,” House Speaker Pro Tempore Tanner Magee, R-Houma, said in an interview Wednesday. “There is just no buy-in on what [Insurance Commissioner Jim Donelon] is proposing as being a solution.”

As recently as last week, Senate President Page Cortez, R-Lafayette, and the Edwards administration said it was likely that lawmakers would convene in a February special session to put $45 million into a incentive fund for insurance companies that Donelon is touting as a fix to the state’s insurance crisis

But in interviews Wednesday and Thursday, many legislators said they weren’t prepared to transfer that money in a February special session – or even when the Legislature convenes for its regular session in April. They are not convinced Donelon’s incentive program would alleviate the state’s insurance problems. 

“I need more information before I sign off on that,” said House Democratic Caucus Chairman Sam Jenkins of Shreveport. 

The state has seen several insurance companies go under or pull out of Louisiana after being walloped during the 2020 and 2021 hurricane seasons. The collapse of the market is dumping more homeowners’ policies on the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp., and driving up housing costs.

In communities along Louisiana’s coast, property insurance premiums may now come close to or exceed the cost of home mortgages, said legislators who represent those areas.  

To address this crisis, Donelon wants to implement an incentive program similar to one he put in place after hurricanes Katrina and Rita in 2005. Insurance companies willing to write policies for higher-risk properties would receive public grants to help cover their costs. The goal is to divert policies from Louisiana Citizens, which is required by law to price their coverage higher than the private market.

Lawmakers initially signed off on this proposal from Donelon during their 2022 legislative session, but they didn’t put any money behind it. Now the insurance commissioner wants $45 million to fund his idea, and more legislators are raising questions.

“Do we need help with insurance? Absolutely,” House Speaker Clay Schexnayder, R-French Settlement, said. “But is this the right plan?”

Magee and a handful of others aren’t convinced the initial Katrina and Rita incentive fund was successful, as Donelon has repeatedly claimed, and they question whether that same strategy should be used again.

While more insurance companies began writing policies in the aftermath of Katrina and Rita, it could have been because Louisiana went several years without a major storm, not necessarily because of the incentives offered, they said. 

Some of the smaller firms in that Katrina and Rita insurance program also went belly up after Hurricane Ida, according to The Times-Picayune

“I think Commissioner Donelon thinks that people down here are clamoring for a bunch of sh—- insurance companies like we had before and we’re not,” said Magee, who represents communities in Terrebonne Parish affected by Hurricane Ida. “We want good insurance companies that are actually going to be partners here and pay claims and do all the things they were supposed to do.”

Magee suggested the money might have more immediate effect if it was used directly to lower premiums in Louisiana Citizens, where people have to get insurance coverage if they can’t find it on the private market. Sen. Bret Allain, R-Franklin, agreed and said he would prefer to see the state put $45 million into making Louisiana Citizens a better, long-term option. 

“Half of these companies defaulted that we brought in and propped up,” Allain said. “I don’t know why we don’t use the money to prop up Citizens instead. We could have a sustainable product of last resort.”

Magee also said the money might be better spent on a program that allowed people in hurricane-prone parishes to renovate their homes with more storm-proof features, thereby making more properties attractive to private insurers. 

Legislators have also expressed an interest in using Donelon’s incentive fund to entice companies still operating in Louisiana to write more policies in higher-risk areas. They are not as interested in luring new, untested companies into the market with public funds.

In an interview Wednesday, Donelon said the money could, and likely would, be spent on companies already operating in Louisiana. One firm in Louisiana has even approached him about getting public assistance retroactively for policies it has already written. 

Donelon said he will also make sure the people who led insurance firms that failed in the past aren’t involved with the companies that access future incentives.

“Not on my watch will any of those players participate in this state-funded incentive program,” he said. 

The insurance market crash in Louisiana also isn’t solely the result of back-to-back massive hurricanes in 2020 and 2021, Donelon argued. Some companies went under because they were also operating in Florida where, in Donelon’s opinion, the state regulations were too loose.

But part of legislators’ wariness about Donelon’s program is they don’t know what companies might benefit from the $45 million he’s requesting. Donelon has said nine firms are interested in the financial incentives, but he hasn’t shared the names of those companies with lawmakers yet.

Senate President Page Cortez, R-Lafayette, and Schexnayder said Thursday they want to know what specific companies are considering Donelon’s program.

Without that information, Schexnayder said putting $45 million into the incentive fund would be akin to agreeing to buy a car without knowing anything about its make or model. 

House Conservative Caucus Chairman Jack McFarland, R-Jonesboro, took it a step farther, and said he not only wants to know who the companies are, but he also wants an opportunity to question them.

“I want to ask about the premiums they are going to offer,” he said. 

Not all legislators are skeptical of Donelon’s plan though. Cortez said he would likely support the incentive program, even if it is only a “Band-Aid” to temporarily relieve some of the homeowner insurance pressure.  

Gov. John Bel Edwards also expressed no reservations about Donelon’s proposal on the governor’s radio show Wednesday. Edwards said he believes he and lawmakers were on the same page about supporting Donelon’s concept, though there was disagreement about whether a special session was necessary. 

Donelon is not just asking lawmakers to hand over $45 million – he wants them to agree to hand over the money some time within the next month during a special meeting of the Legislature. 

The insurance commissioner said he needs the money early, before the Legislature convenes in April, so companies  purchasing reinsurance – essentially insurance for insurance companies – will know it’s available to them this spring. 

Donelon also said the longer the state waits to set up the incentive fund, the more households will be dealing with large rate increases. Louisiana Citizens increased premiums 63% this year. With each passing month, more households are going to see those new rate hikes go into effect, he said.  

Still, Edwards would likely be asked to call the special session and didn’t seem convinced Wednesday that it would be successful yet. He said there was a “difference of opinion emerging” among lawmakers whether a special session should be convened. 

Donelon will have at least one more chance to convince lawmakers of the need for his program and the special session. He’s scheduled to speak before the Legislature’s Joint Legislative Committee on the Budget Friday.

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Julie O'Donoghue
Julie O'Donoghue

Julie O’Donoghue is a senior reporter for the Louisiana Illuminator. She’s received awards from the Virginia Press Association and Louisiana-Mississippi Associated Press.