Less than two years after Hurricane Laura, the state Department of Insurance fined and publicly chastised several insurers who had drawn the largest share of complaints from homeowners.
But nearly three years after Hurricane Ida, the state has not made similar moves to punish the worst-behaving insurance companies after that storm.
State data shows at least 17 insurance companies – mostly the kinds of smaller firms that have drawn scrutiny since the hurricanes of 2020 and 2021 prompted an insurance crisis in Louisiana – drew more complaints than should have been expected, given their market share.
The Department of Insurance investigated some of the companies accused of bad business practices after Ida, and finalized three of those probes in recent months. Though the agency found two of the three companies failed to pay claims on time in nearly a quarter of cases, Insurance Commissioner Tim Temple’s office said it does not intend to penalize the companies with fines.
It suggests a departure from the approach taken by Temple’s predecessor, Jim Donelon. Though the maximum fines allowed by law – a few hundred thousand dollars per company – represent a fraction of the revenues collected by most Louisiana insurers, Donelon said last year he felt it was important to levy fines after Laura to send a message to the industry.
It remains unclear whether any other companies that may have lowballed claims or simply refused to pay them after Ida will face punishment. The Department of Insurance said it is still conducting investigations against two other insurers, though it’s not yet clear whether any ongoing probes will result in fines. Several of the worst offenders eventually collapsed; the smaller, undercapitalized firms that failed also were also more likely to lowball or refuse to pay claims, a Times-Picayune investigation published earlier this year found.
New strategy
The strategy represents a shift from Donelon’s tack in the 18 months after Hurricanes Laura and Delta hit in 2020. In the summer of 2022, as the insurance crisis was taking root and several small companies were failing, he issued a press release announcing he was fining several companies a combined $721,500. That included a maximum $250,000 fine to United Property & Casualty, one of the dozen insurers that went belly-up, though the most any company wound up paying after negotiations was $150,000.
“I strongly encourage our state’s insurance industry to take note of the unacceptable behavior we found and know we will continue to pursue appropriate fines and regulatory action against any insurer that is not meeting their obligations,” Donelon said then.
That was a year after Ida, and it was clear that problematic behavior among insurers hadn’t gone away. In a separate review of five insurers’ claims handling after Ida, the Insurance Department found that more than 40% of the complaints reviewed had merit. The agency referred four insurers for “potential regulatory action,” according to the Louisiana Legislative Auditor.
Louisiana had the highest rate in the nation of claims paid later than 60 days in 2022, the year after Ida hit, according to the National Association of Insurance Commissioners. That year, insurers took more than 60 days to pay nearly 50% of all claims in the state. The rest of the nation saw a rate of 22% on average.
So-called “market conduct” examinations, released in response to a public records request, found that two companies, Centauri and Occidental, had significant rates of failing to pay claims on time, of up to 24%. Neither company responded to a message seeking comment. A third probe, of Homesite Insurance Company, found less frequent violations.
The legislative auditor suggested the Insurance Department should step up its monitoring of insurers by conducting more investigations.
‘Positive’ relationship
John Ford, a spokesperson for the agency, said Temple did not think any of the questionable conduct uncovered in the three completed probes was serious enough to call for fines. He said the agency believes the companies took too long to pay claims because of the scale of Ida, not “to intentionally harm consumers.”
“At a time when many insurers have failed and others have stopped doing business in Louisiana, Commissioner Temple is working to establish a positive regulatory relationship with insurers in a way that promotes a healthy, competitive marketplace and effectively protects consumers,” Ford said.
Ford said Temple is taking a “hands-on approach” ahead of hurricane season to make sure insurers are ready. And he said the state’s new law on handling claims, which Temple pushed as part of his legislative package, will help make sure insurers can manage claims better than in the past. He added that the department hasn’t ruled out fining the two remaining companies being investigated for post-Ida behavior.
Ben Riggs, head of Real Reform Louisiana, which lobbies against legislation to make it harder to sue insurers, among other things, criticized Temple for lax enforcement while working to pass a pro-industry agenda at the Legislature.
“This is a betrayal to the Louisiana families and small business owners that elected Temple to regulate the industry, hold insurers accountable, and protect policyholders,” Riggs said.
Temple, a Republican, is a former insurance executive who ran unopposed after Donelon announced he was stepping down last year at a time when insurance is among the top issues for residents.
Temple has espoused a different philosophy than Donelon, a fellow Republican who served 18 years in the job. Temple championed a series of bills, all since been signed by Gov. Jeff Landry, to make it easier for insurance companies to drop policyholders, raise rates and have more time to pay claims after a major storm. And shortly after taking office, he made internal rule changes, lifting profit caps on insurers and allowing them to self-report what he called “minor” market conduct violations.
Temple has said these changes will make Louisiana more attractive to insurers, and ultimately lead to lower rates as a result, though he has cautioned those changes could take years.
New claims process on the way
Temple and Republican lawmakers are also hoping a new law passed as part of the package will go a long way toward addressing the delays in payment that were ubiquitous after recent storms.
The law, sponsored by Sen. Kirk Talbot, R-River Ridge, aims to address the types of disputes that resulted in fines from Donelon’s administration.
The law will give insurance companies more time to pay claims after a major storm, and will establish a new “cure period,” in which insurers can try to resolve issues with a policyholder before they file a lawsuit. The bill, crafted as a compromise with plaintiffs’ attorneys who have brushed back attempts to limit homeowners’ ability to sue, goes into effect in July, after sailing through the Legislature without opposition.
Talbot said the bill also makes clear that insurance companies won’t be hit with bad faith penalties for failing to pay for damage they didn’t know about, like mold that develops over time, which he said could prompt faster initial payments.
The bill more clearly defines when the clock starts on the 30-day period in which insurers must pay claims, which Talbot said both insurers and plaintiffs attorneys manipulated in the past.
“This bill cleans it up for everybody,” he said. “If they don’t pay you on time, they’re going to get nailed. They’re going to be subject to bad faith penalties. That takes a lot of the murkiness out of the claims process.”
More broadly, Temple’s strategy has not been well-received by voters. A Times-Picayune poll released last month showed most residents disapprove of the linchpin of his plan, the phaseout of a unique and longstanding rule that insurers can’t drop policyholders who have been their customer for at least three years. Donelon was a steadfast defender of that rule, while insurance companies lamented it as bad for business.