Louisiana Department of Insurance
MONTHLY REPORT
Volume 11, Issue 2
February 2011


Members
Commissioner Jim Donelon
Theodore "Ted" Haik, Jr., Chair
Jeff Albright, Vice Chair

Raymond J. Aleman, Sr.
Lee Ann Alexander
Paul Buffone
Sheriff Greg Champagne
Representative Page Cortez
Manuel DePascual
Nick Gautreaux
Michael Guy
Chris Haik
LTC John A. LeBlanc
Senator Eric LaFleur
Ann Metrailer
Representative Nickie Monica
Robert Moorman
Senator Dan "Blade" Morrish
Carrie Pena
Stephen Schrempp
Earl Taylor


Staff
Terrell B. Moss, Director

David Evans,
Supervisor/Research Analyst

Katie Walsh, Administrative Assist./Research Analyst

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kwalsh@ldi.la.gov

Homeowners Ad Hoc Committee Meeting

The Homeowners Ad Hoc Committee of the Louisiana Property and Casualty Insurance Commission (LPCIC) met earlier this month to delve further into the wind mitigation issues that were raised in a meeting of the full LPCIC this past October. Committee Chairman Manny DePascual oversaw an informative and active discussion of some of the experiences and problems that have arisen in implementing and encouraging retrofit to the wind mitigation measures that are the basis of the Louisiana Uniform Construction Code. Senator Dan Morrish serves as Vice Chair.

Guest speakers included Barry Gates, Vice President of Product Management at Bankers Insurance Company on wind mitigation in Louisiana and Donald Griffin, Vice President of Personal Lines at the Property Casualty Insurers Association of America on wind mitigation in other states. Due to a prior commitment Mary Frances Fournet, Vice President of Product Management at American Strategic Insurance Corporation, sent a statement on wind mitigation in Louisiana that was read into the record.

These speakers were joined by a panel consisting of: Ray Kothe, Chairman of the Louisiana State Uniform Construction Code Council; Randy Noel, Board Member and Immediate Past Chair of the LSUCCC and Bill Hatchett, Partner of Wind Mitigation Surveyors. Panel members from the Louisiana Department of Insurance included Ed O’Brien , Deputy Commissioner of Property & Casualty;  John Lamke from the Office of Consumer Advocacy and Rachelle Carter, Director of P&C Policy Forms .

Committee members actively participated in the discussion which covered some of the following issues:

  • Wind mitigation is the structural designs, construction techniques and materials that have been proven to avoid or reduce damages from hurricanes. Some retrofitting can be more easily and economically accomplished – such as bracing of garage doors, hanging exterior doors to open out and installing a secondary water barrier when re-roofing. But some measures are expensive and interdependent – such as rafter-to-wall strapping is dependent on wall-to-foundation fastening for maximum effectiveness.
  • Continue to learn from Florida’s lengthy experience in wind mitigation – both the good and the bad. In particular, do not impose on insurers a specific premium credit for specific wind mitigation measures, but do adhere to a rigorous inspection program to assure that construction and the materials used meet or exceed Code requirements in every construction.
  • It will take time for Louisiana to realize all the benefits of wind mitigation. Insurers rely on catastrophe modelers – who are starting to consider wind mitigation – to estimate coastal risk. They rely on reinsurers – who do not give much credit to wind mitigation – to assume some of the insurers’ coastal risk. Some homeowners in coastal and southern parishes are still having trouble finding insurance in the voluntary market. It is difficult in these economically challenging times for these homeowners to see the benefit in retrofitting their homes when there is no guaranty that the investment will generate more available and affordable insurance options.
  • Education and consumer awareness are vital to successful wind mitigation. Contractors, wind mitigation surveyors, insurance agents and homeowners all must become fully aware of the specific measures, insurance premium discounts and long-term savings to those who build or retrofit to the Code or the more stringent standards of IBHS.

The Homeowners Ad Hoc Committee and LPCIC will continue to gather information and research these issues.

Don’t Let an Unsolicited Repair Lead to Insurance Fraud!

Have you ever had a knock on your door for a roof inspection that you did not request? Been approached at a service station by a glass repairman offering “free” windshield repair? Had a contractor offering an unsolicited estimate for replacing storm-damaged siding?

The National Insurance Crime Bureau (NICB) – a non-profit organization whose membership is composed of over 1,000 insurers and transportation-related firms dedicated to fighting insurance fraud – suggests that you be aware that many repair scams begin with an unsolicited offer of repair services.

Unnecessary auto glass repair, aggressive and exorbitant towing charges, needless home repairs, unwarranted total roof replacements, solicitation of accident victims – these and other kinds of insurance scams contribute to the fraud loss of the property and casualty insurance industry estimated to cost $30 billion annually. And the cost of fraud is ultimately borne by consumers in the form of higher homeowner and auto insurance premiums.

To be sure, not all solicitations are scams. Honest, enterprising individuals and firms make solicitations too – especially in these difficult economic times or when a hurricane or other catastrophic event devastates an area. However, a prudent consumer will make the effort to separate the reputable from the fraudulent. NICB advises consumers to always contact their insurer or agent first before allowing anyone to perform an inspection or repair work that will be “covered” by their insurance.

 The following are some of the tips the NICB offers when considering home repairs and before hiring a contractor:

  • Contact your insurance company first.
  • Get more than one estimate.
  • Get everything in writing. Cost, work to be done, time schedules, guarantees, payment schedules and other expectations should be detailed.
  • Demand references and check them out.
  • Never sign a contract with blanks; unacceptable terms can be added later.
  • Never pay a contractor in full or sign a completion certificate until the work is finished and you have ensured that the reconstruction is up to current code.
  • Never let a contractor pressure you into hiring them.
  • Never let a contractor interpret the insurance policy language.
  • Never let a contractor discourage you from contacting your insurance company.

Also, get some identification from the sales rep and review and understand the documents you submit to your insurer.

NICB recently released a statistical analysis of the reasons its member insurers suspected fraud and referred those claims to NICB for closer review and investigation in 2008, 2009, and 2010. The questionable claims referral reasons were categorized as Property, Casualty, Commercial, Workers’ Compensation, Vehicle, or Miscellaneous and each claim could have up to seven referral reasons.

The numbers show an increase in cases of suspected fraud: 74,146 in 2008, 84,407 in 2009, and 91,797 in 2010 – almost a 24 percent increase in questionable claims from 2008 to 2010.

The two referral reasons with the largest percentage increases from 2009 to 2010 were both in the Vehicle questionable claims category. Suspected Auto Glass Fraud increased 450 percent from 397 in 2009 to 2,182 in 2010. Suspected Inflated Towing/Storage Bills increased 116 percent from 289 in 2009 to 624 in 2010.

New Study Indicates Red-Light Cameras Lower Deaths

A study just released by the Insurance Institute for Highway Safety concludes that 159 lives were saved between 2004 and 2008 in 14 of the country’s largest cities through the use of red-light cameras. The study projects that 815 lives would have been saved had red-light cameras been operating during that same 5-year period in all 99 large U.S. cities.

For the purposes of the study, large cities were those with more than 200,000 residents in 2008. The study focused on fatal crashes where the red light runner could be identified as having broadsided the other vehicle, bicyclist or pedestrian. The researchers also found a residual effect of reduced fatal crashes at signal-controlled intersections with no automated enforcement in those cities that employed red light cameras during the study period.

The use of red light cameras remains controversial. Opponents contend that while more lethal right angle crashes may be reduced, rear end crashes increase. There are also accusations that automated enforcement violates privacy rights and is nothing more than a revenue source for city governments. While some states are permitting this enforcement technology and some cities are adding it, others are banning its use.

This issue will be an agenda item for a future meeting of the Auto Ad Hoc Committee of the LPCIC.