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Senators' grandstanding impedes real insurance solutions

You know there are elections around the corner when you get a bunch of grandstanding by members of the Louisiana Senate who make a lot of silly, unhelpful statements, but who really offer no serious solution to insurance problems in the wake of the 2005 hurricane disasters.

We seem to be having Senate Insurance Committee meetings left and right across the state, even though the Legislature won’t convene for another eight months. Chalk that up to its chairman’s Republican John David Cain running in the Sep. 30 special election for insurance commissioner, as if doing this makes it look like he’s doing anything constructive at all.

Other members seemed to have seized the opportunity for free publicity to make themselves sound like champions of the little people in order to win votes – a dangerous but prevalent mentality among Louisiana politicians which casts aside the desire to thoughtfully analyze public policy problems and has lead the state to being at or close to the bottom of every measure of quality of life.

Running for Congress, Republican Craig Romero sputters about how allowing insurer Farm Bureau to cancel policies after previously being allowed to raise rates – in essence, pocketing all of this money during a period of low risk – was akin to theft. Well, I don’t know the minute details about how the state’s Department of Insurance works, but I do know that the Department’s actuaries regularly review rates with a company’s financial position being part of that calculation. If Farm Bureau sopped up this money now, then in the future the higher balances will mean they will be forced to charge lower rates. That’s not theft; it’s the “pay me now or pay me later” choice where the company has opted for the latter.

Running for mayor of Opelousas, Democrat Donald Cravins thundered about “companies are basically exercising a free hand to do as they will with very little regulation from the state Department of Insurance. There's a law in effect that says a company can raise a premium 10 percent. They're raising them 20, 30 and 40 percent.” Well, I’m no senator, but I do know that R.S. 22:1401 says the Insurance Rating Commission may permit an increase of any size after appropriate review by the Deaprtment. So is Cravins charging, because he sees a “free hand to do as they will” by the presence of some large increases that the Department of Insurance is not properly vetting rate increase requests, and that the Insurance Rating Commission is derelict in its duty? Unless he has proof of these things, making such allegations is irresponsible.

Running for reelection next year, Democrat Nick Gautreaux wants to introduce a bill to allow the state-owned insurer to lower its rates. What Gautreaux doesn’t seem to understand is rates are going up because they have been under-priced relative to actual market conditions – and the subsidizer in the past to compensate still are Louisiana taxpayers and home insurance ratepayers, who thusly are compelled to transfer some of their wealth to other individuals who live in high risk areas. This would just under-price risk even more and put greater redistribution demands on those who chose not to buy home insurance in risky areas.

You get foolishness (and bottom-shelf state rankings) like this because of an attitude that too many have in this state that other people ought to pay instead of you paying for your own decisions. For those who go around saying home insurance now is “price-gouging,” and that if rates aren’t forced lower that “quitting, going on welfare and letting everybody else pay my stuff” is the preferred alternative (as if somebody hasn’t been paying for part of their insurance all along because of under-pricing revealed by the disasters), let’s be clear: nobody is putting a gun to your head and making you own a home wherever you want to live. If you think home insurance is too high, sell out and rent. Or, move away to a lower-risk area or to a less-grandiose property if you want lower rates.

I’m sorry, it’s just that simple. There’s no grand conspiracy among insurers to artificially inflate rates; even in a heavily-regulated industry such as insurance there’s enough of the free market left to prevent collusion and to ensure that private insurance will be made available to all who want it – if the state doesn’t allow the reward to not compensate for the risk involved by pursuing a populist solution of lower rates just because they were under-priced for so long. And it’s certainly unfair to make others pay for a few to have the privilege of artificially lower rates. But perhaps the worst thing of all is to hear these politicians, instead of offering serious analysis based upon some understanding about how the real world works, spout off with drivel that only makes coming up with the optimal solution all the more difficult.

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