02 August 2007

Throw The Insurance Companies Out!

It is time to toss the insurance companies out of Louisiana, and start a grand experiment in state-run insurance for health, homeowners and auto. I know, this sounds crazy - the state is not particularly good at running much of anything - but in all honesty, the insurance situation in Louisiana could not get any worse. Not even in the hands of our politicians. Here is why it will work.

First, nearly everyone in the state needs insurance for home, auto and health. However, all insurance companies are extremely selective and refuse coverage for those most often in the greatest need. Those with pre-existing health conditions, for example, most often have the hardest time getting decent health insurance. For homeowners in New Orleans, there is no way to get a new homeowners policy, unless it is through the state-run Citizens Corp. And we all know about the auto insurance debacle. In Louisiana we have one of the highest rates of uninsured motorists in the U.S.

Additionally, we pay some of the highest premiums in the U.S. for all three of these types of insurance policies. Here we are, living in a relatively small, poor state, and a large portion of people's (and corporate) income goes to insurance. Then, one small incident (a little roof damage from a wind storm, high blood pressure, a fender-bender) and your insurance company drops you like a hot-potato.

Potentially, without costing anyone any additional money (what you pay in premiums now to insurance companies would go to an insurance tax), and potentially with future reduction in insurance costs as risks get spread out, we could take over all of the homeowners, auto and health insurance in the state, and provide a comprehensive insurance plan that does not kick people out for any reason. The young and healthy help to keep the health insurance costs stable for the old and sick; hurricane-free Shreveport helps to reduce homeowners insurance costs for those in New Orleans.

Most importantly, by offering universal insurance coverage, especially health insurance, we would attract many businesses to Louisiana that currently pay very high premiums for their employees in other states. For example, if you are a corporation with a small presence in New Orleans and headquarters in Houston, but are paying on the average $500 per employee monthly for health insurance for your Texas employees, the free health insurance in Louisiana would be a big incentive to move a greater portion of your operations to New Orleans. If that same corporation moved 1000 employees from Texas to Louisiana, they would save $500,000 in health insurance costs monthly. And that is just health insurance; there would be considerable savings in auto and business insurance costs for that corporation as well. Companies that moved to Louisiana would become considerably more competitive globally as well as in the U.S.

Of course, there are legitimate concerns about the ability of the state to manage such a large system. But as bad as things are with the insurance industry in Louisiana, and in New Orleans in particular, it would be difficult to imagine creating a worse system. Big and progressive changes are needed for recovery and growth in South Louisiana. This single move - tossing out the private insurers that don't care about anything besides massive annual profits - could radically improve conditions in the state. Additionally, we would create such a better business environment that other states would be forced to do the same thing in order to keep their businesses from moving to Louisiana to become more globally competitive.


At August 02, 2007 10:39 AM, Anonymous Editor B said...

I'm all for it. Though it seems politically difficult to say the least.

At August 03, 2007 12:02 PM, Blogger chandan said...

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At May 12, 2008 5:19 AM, Anonymous Anonymous said...

Good thought, but... the states with the most regulation have the highest rates out there. Insurance companies need to use things like insurance scoring and pricing models in order to actually lower rates and make coverage more available. And dropping people after one incident is simply not true. Larger companies actually like to keep folks around longer these days.

As far as letting the state run things... bad idea. They have no idea how to do it, and their actuaries are folks who can't cut it in the insurance field. You want change? Hammer away at your elected officials. As far as homeowners rates, unfortunately in a hurricane zone, you have to pay those rates... it is the cost you pay for living in a high risk area (no different than Florida or tornado alley). Don't believe the hype you read in the papers. All one sided crap. Insurers want to write where they can, and want to make money (a logical thing in the business world) but they also have the right to be careful so they can protect all of the policyholders out there so they don't become insolvent and don't have the ability to pay claims. This isn't just a Katrina thing. It all started with Andrew. Allstate, for instance, started a separate company called Allstate Floridian just to deal with the issue. When the cost of gas goes up, nobody wants the state to start running gas stations... they DO however, want the government to provide some oversite... but big oil, just like insurance companies, want to make money. It's just that big oil does not have nearly the risk involved.

At June 09, 2008 2:18 PM, Anonymous Homeowner Insurance Quotes said...

Huzzah! Throw the bums out!


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