Pelican Institute: Keep, But Shrink Citizens Insurance

From a release by the Pelican Institute, a New Orleans-based market-oriented think tank…

Even in the aftermath of Hurricane Katrina, Louisiana has managed to retain a reasonably healthy private insurance industry. Almost five years after Katrina’s landfall, insurance has remained available–although expensive–in the state. Unlike Florida to its east and Texas to its west, Louisiana has steered a moderate, common-sense course in dealing with insurance. New carriers writing property insurance have entered the state, and even though Louisiana was the site of the nation’s largest natural disaster, premiums are actually lower than in Florida or Texas.

Governors Kathleen Blanco and Bobby Jindal and Insurance Commissioner James Donelon deserve credit for this. Without leaving individuals in the lurch or forcing homeowners of modest means to go without insurance, they have implemented largely successful reforms that have brought insurers back into the state. Whereas major national insurance carriers have withdrawn or cut back in states such as Florida and Mississippi, they continue to do business in Louisiana.

Several serious problems remain, however, and elected and appointed officials throughout Louisiana should set their sights on solving them. Three stand out:

1. Louisiana Citizens Property Insurance Corporation, a state-run entity that sells insurance, is the third-largest entity of its type and did not shrink during 2009. Its existence and size mean a significant number of people simply cannot find private market insurance coverage. It exposes the state to billions of dollars in potential liability.

2. By many accounts, there are insufficient incentives for shrinking Louisiana Citizens. In many cases, agents and private insurers are happy to allow people to remain in Louisiana Citizens.

3. The state’s property insurance rates, averaging roughly $1,400 per year for residences, are the third highest in the United States.

Click here to download the full report in PDF format.

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