As the first anniversary of Hurricane Katrina approaches, too much of the landscape in the hardest hit areas of Louisiana remains devastated.
Even at this late date, human remains are still being found in the most heavily damaged areas. Infrastructure replacement in many neighborhoods is minimal, and huge questions remain regarding utility rates, property taxes and the availability and affordability of insurance.
Of all the issues facing the areas of the state most vulnerable to hurricanes, the future of the insurance market is perhaps the most critical. Most home and business owners simply cannot rebuild without insurance coverage, since mortgage companies demand it. Finding adequate coverage is likely to become more of a challenge in the future given the fact that many insurance carriers are not enamored with continuing to underwrite in areas with a high likelihood of frequent storm damage.
The special election for Insurance Commissioner this fall, and the legislative elections next year, will firmly implant politics into the search for answers to the insurance coverage dilemma facing our state. If the last legislative session is any indication, the injection of politics into the equation is going to worsen, not lessen, the insurance crisis. During this year's Regular Session, several bills passed that attempted to rewrite existing insurance contracts to extend the time period allowed before a lawsuit must be filed in an insurance dispute. The goal may have been laudable, but the precedent of the Legislature being allowed to rewrite existing contracts is a recipe for economic chaos.
It is not likely that the courts will allow the legislation to stand. Realizing that, the authors of the bills injected language calling for the courts to expedite a ruling prior to the August 29 one-year anniversary date of the Katrina damages. The judicial system has now ruled that there will be no expedited hearing on the matter, reminding the Legislature that it cannot run the affairs of the judicial system. As the opponents of the legislation pointed out, insurance policyholders were left with false hopes that they would have many more months to attempt to settle their claims with their carriers. If they have disputes remaining, they must now rush to find competent legal counsel and stand in line at the court house to file their suits. The legislation wasn't a solution to the problems faced by the policyholders, but it was great politics for the legislators.
Look for more political posturing when the insurance issues are addressed again by our politicians. The fact is that insurance companies are not going to write policies under conditions that guarantee they will lose money. They have a fiduciary responsibility to their stockholders to make a profit. If that can't happen, they won't underwrite. Those companies were not sent a very good message when the governor of the state, in an official press release, said: "...we will take a hard look at future insurance solutions that are solely coverage-oriented and not profit-oriented." Governor, you can't order companies to write policies. If the goal of the state is to force companies to provide coverage even if it means they lose money, an even worse insurance crisis is about to hit.
State government should see that insurance consumers are protected from predatory practices and that legitimate claims are paid. But it is not the role of state government to force any business to lose money in order to provide a public service. If politics is the driving force in addressing the severe insurance problems facing the state, those problems will only get worse.