Private insurers are getting ready to start taking over Louisiana’s Citizens Property Insurance Corp. The state-run insurance agency has fared well in the past four years, experiencing periods of growth throughout 2007 and 2008. The state’s Department of Insurance is looking to “depopulate” the program, however, in an attempt to lower insurance rates for the majority of policyholders. To this end, regulators are inviting private insurance companies to begin selling policies through Citizens. Regulators believe that these policies will bring higher quality service to consumers.
Part of the success behind Citizens comes from the fact that many insurance companies stopped writing policies in Louisiana after Hurricanes Katrina, Rita and Gustav. This meant that many homeowner’s had to turn to the state-run program to find coverage. While Citizens is considered a high-risk insurance pool with excessively low rates, the sheer number of people purchasing insurance through the program – some 174,000 property owners in 2008 – the program has remained solvent while similar programs in other states have fallen into disarray.
Private insurers participating in Citizens will be required to write policies worth $20 million in several high-risk regions of the state. Currently, Citizens has set aside more than $100 million as a way to entice private companies to participate in the program. Regulators hope that companies will be able to hold at least $2 million in surplus, which would make their entry into Citizens a boon for the state’s insurance industry.