Since his dramatic pivot from the political left to right after his defeat for the U.S. Senate in 2004, the question always about state Treas. John Kennedy has been whether he truly has embraced conservatism. As he gears up for an expected run for governor in 2015, the things he says and does continue to cast doubt on that transformation.
The latest came in his response to Atty. Gen. Buddy Caldwell’s legal opinion confirming that the state corporation that insures property when no private sector entity will, Louisiana Citizens Property Insurance Company, could increase wind and hail policies for homeowners in several parishes where no standalone private market activity exists because of the high risk involved. In part, this reluctance to write has existed precisely because government will do it.
Legally, Citizens must offer policies at no lower than 10 percent higher than the market rate of a basket of insurers, or the highest rates charged by insurers with a minimal increase in recent business if not wind and hail policies, but if neither exists, then an actuarially rate based on recent past history must be used, This last approach underappreciated actual risk of wind and hail damage and therefore set the state up to collect too little money to pay off potential future major storm damage. In this situation, as occurred after the hurricane disasters of 2005, taxpayers would have to make up the difference.
Thus, for the upcoming rate year Citizens changed its approach to derive a standalone wind and hail market rate, by looking at the policies major insurance companies were writing in parishes and took out the rates they charge for wind and hail coverage. It used those numbers to set a market rate in areas where those separate policies weren’t being written by private companies. This set up for some rate increases more than doubling and on average costing almost as much as $200 extra a month in some places.
Kennedy, trained in law, objected, saying there had to be an actual market rate, which led Insurance Commissioner Jim Donelon to ask for the opinion. Caldwell, a lawyer, former district attorney and, like Kennedy, who had switched from Democrat to Republican affiliation in the middle of a term, ruled the calculation valid. The opinion noted that since multi-peril policies were being written in these parishes by the private sector, the statute did not prohibit the procedure used as Citizens was intended to be an insurer of last resort and by undercutting the wind and hail portion of private insurers it did not act as a residual insurer.
But this did not satisfy Kennedy, and he made a remark most telling about his feelings on the issue: “The point of Citizens is to help people and provide them with insurance when they can’t get it anywhere else. It doesn’t help them if they can’t afford it. Citizens is supposed to be helping people, and it’s hurting them.” He also added that while he understood the need for reduced state liability, “the only thing worse is for our folks to not have any insurance.”
This is vintage Populism 101, straight out of liberalism’s textbook. Not only is Kennedy factually wrong on the issue – wind and hail policies are available as part of multi-peril packages everywhere in the state, it’s just a matter of whether people choose those private insurers’ policies – but he also insists it’s the job of the Louisiana taxpayer to subsidize a select relatively few homeowners instead of taking responsibility for their own choices. If you choose to live in a high-risk area, nobody owes you part of your insurance payments – especially when the state already regulates the rates of private insurers with the purpose of making sure they reflect only what it considers to be a “fair” return on investment.
With this statement, Kennedy seems to think otherwise and appears oblivious to the contradiction it presents, in that it puts the state on the hook for potentially billions of dollars, to some other of the lectures he regularly delivers for public consumption that claim to support fiscal probity in the state. Politically, it represents pure pandering of a handout to a segment of possible future voters, and as such must make genuine conservatives doubt that Kennedy’s declarations in recent years of fiscal conservatism serve as anything more than as instruments of political convenience of the moment designed solely to win elections.