Trying to follow Gov. Kathleen Blanco’s thoughts on having a special session of the Louisiana Legislature would give the observer whiplash, she changes directions so much. Now that idea is off in favor of going with the regular session to introduce an unspecified package of legislation that would encourage insurance companies to write policies in the state. Theoretically, more companies present create more competition and thus lower premiums.
But this approach misses the entire point of how a marketplace works. It’s not the number of competitors that determines price, it’s the actual costs of doing business, conditioned by the economic skill of the provider. No insurer will write policies if they do not believe they can make money doing it, and there’s little Blanco or anybody else can do about that save change existing weather patterns.
What’s scary is Blanco may rely upon the underlying philosophy of a plan supported by U.S. Rep. Charlie Melancon and his Democrat colleagues – trying to get the rest of the country to subsidize Louisiana, as well as other high-risk states with coastal areas. Their plan would create a nationwide risk pool where taxpayers who chose to live in lower-risk areas end up paying part of the bill for those who chose to live where the risk is higher.
Of course, something like that already exists, so these politicians merely would add on to it. Further, they would introduce more government regulation into the process – a guaranteed recipe to drive away potential insurers and, thus, force government with its higher-cost solutions to ratepayers and taxpayers to take up the slack.
So, in the end, Blanco may try to institutionalize permanently the temporary solution of using a budget surplus to reduce costs on ratepayers, which still represents a forced subsidization of taxpayers of homeowners who choose to live in higher-risk areas. However, at least as envisioned by its proponents that was not designed to be a permanent solution. Absconding with taxpayer dollars into a high-risk fund would be. And since Blanco is mum on what she proposes, this well may be what she intends as her “solution.”
Which is no solution at all. Introducing greater marketplace discipline is the only way to guarantee fair pricing on insurance in the state, as well as increasing efficiency in government regulation such as by abolishing one of the Insurance Commissioner or the Insurance Rating Commission, for starts on account of their redundancy. This would take political foresight and courage Blanco lacks; she seems more likely to take the convenient, populist route proposed by her Democrat cohorts which is a mere election stunt trying to play to areas of Democrat strength (Atlantic and Pacific non-Southern states, plus select districts like Melancon’s).
At this point, it seems only a special session which looks at insurance provision comprehensively (including commercial lines as well) along market-driven solutions will produce any favorable outcomes for Louisiana as a whole on this issue.
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