Louisiana passes insurance rate regulation bill, trade groups warn it will negate legal abuse reforms

By Michael Loney

May 28 - (The Insurer) - Insurance trade groups have said that Louisiana’s legislature and governor are taking “three steps forward and five steps back” by following the enactment of legal system abuse reform bills with a rate regulation bill that was passed on Tuesday.

Louisiana’s House on Tuesday passed HB 148 following the Senate on May 21 approving its version of the bill, which would reject rate filings considered excessive and require these filings to be made public.

The National Association of Mutual Insurance Companies has urged Louisiana Governor Jeff Landry to reconsider HB 148.

Namic president and CEO Neil Alldredge on Tuesday sent a letter to Landry to voice the insurance industry’s concerns with the current version of the bill, arguing that it would significantly disrupt the state’s insurance market.

“This has the potential to be the biggest mistake Louisiana can make in its efforts to address the current insurance crisis and increase competition,” said Alldredge. “If signed into law, HB 148 would further endanger the Louisiana market and cause companies to re-evaluate their exposure in the state.”

Alldredge highlighted insurers’ concerns with HB 148’s provisions.

These include arguing that making proprietary and trade secret insurance rate filing information more easily obtainable is likely to decrease competition by discouraging insurers from devoting capital to the state, and will increase the likelihood of litigation over that information.

Alldredge also argued that permitting a “claw back” of premiums paid in what is already a challenging claims environment, with an unlimited look back period, will further disincentivise insurance capital investment in Louisiana.

“The insurance industry appreciates the other legislation aimed at addressing the ongoing challenges in the Louisiana insurance market,” Alldredge said. “However, the negative implications of HB 148 significantly outweigh any collective benefit of other positive reform legislation.”

The American Property Casualty Insurance Association said it appreciates the efforts of Louisiana Insurance Commissioner Tim Temple and the Louisiana legislature in addressing the state’s insurance crisis this legislative session.

Hilary Segura, department vice president of state government relations at APCIA, said in a statement: “APCIA applauds the passage of critically needed legal system abuse reforms, specifically HB 431 (modified comparative negligence), HB 450 (‘Housley’ Presumption), and HB 434 (No Pay No Play).”

But she added: “However, the Louisiana Legislature and Governor Landry are essentially taking three steps forward and five steps back when it comes to improving the state’s insurance market. Any benefit or cost savings that may be realised by enacting the legal system abuse reform bills could be negated by the harmful impact of the Governor’s rate regulation bill (HB 148).”

Governor Landry opened his second regular session last month by highlighting insurance reform as one of his priorities.

The governor suggested that “both sides are to blame” for the insurance crisis in his state,

He said that rates will go down “only if we give our insurance department the power to lower rates”.

“I believe it’s time the Commissioner of Insurance should have the authority to reject excessive rates, not just inadequate ones,” Landry said. “The proposed legislation expands the Commissioner's oversight by removing legal exemptions and requiring rate filings for more than just informational purposes.”

Insurance commissioner Temple has criticised HB 148, arguing that it is based on the incorrect premise that his department cannot deny rate increases that are not justified actuarily.

APCIA believes that HB 148 will politicise the process by which insurers set rates when it should be a fact-based process based on actuarial science.

“By allowing the arbitrary suppression of rates and forcing companies to share proprietary or trade secret information, Louisiana will likely teeter towards a very unstable road similar to California,” Segura said.

“If HB 148 is signed into law in its current form, the on-going crisis in Louisiana’s insurance market is likely to deepen and policyholders will continue to struggle with the affordability and availability of insurance in the state,” she added.

There has been recent progress on tort reform in some southeast U.S. states. This includes Florida passing sweeping reforms in 2023 and Georgia enacting tort reform earlier this year.