Top Insurance Stories in 2007 in South Central

Weather, directly or indirectly, was a driving force in the insurance markets for the South Central states of Arkansas, Louisiana, Oklahoma and Texas in 2007. With the exception of Arkansas, throughout the year the South Central states dealt with insurance issues arising from severe weather that occurred during 2007 or in previous years.

Icy Oklahoma
Oklahoma ended 2007 pretty much the way it began the year — with ice storms. On Jan. 16, 2007, Insurance Commissioner Kim Holland declared a state of emergency for all 77 counties in Oklahoma following a severe ice storm that hit the state Jan. 12 – 18. In December 2007, she made the same declaration, again for all 77 counties in the state as a result of the ice storms that occurred Dec. 9 – 12. Such emergency declarations pave the way for emergency claims adjusters from other states to be temporarily licensed to provide immediate claims assistance.

The December 2007 storms were much worse than the ones earlier in the year. In January 2007, some 122,000-plus homes and businesses went without power for days. In December, more than 600,000 lost power during the peak of the storm. As of mid-December Gov. Brad Henry estimated losses from the storm would exceed $200 million.

Sandwiched in between severe winter weather events were disastrous summer storms in June, July, August and September that brought tornadoes and massive flooding to the state. As of late September, the Federal Emergency Management Agency reported that more than $170 million in federal aid had been approved for Oklahoma as a result of the year’s weather catastrophes up to that point.

While insurance companies were handling tens of thousands of claims just days after the worst of the December storm — Farmers Insurance alone reported that by Dec. 13 it had received 6,000 claims — the Associated Press estimated that it would take at 100,000 claims to reach Henry’s estimate.

The insurance companies said most claims involved damage caused when trees weighted down by ice fell on homes or vehicles, or from perishable food items that went bad while the power was out.

No escaping hurricanes
Even though it’s been two years since Hurricanes Katrina and Rita hit Louisiana with a devastating one-two punch, recovery from those two catastrophic storms continued to dominate Louisiana’s insurance environment in 2007.

During the state’s legislative session, the governor, insurance department, insurance agents groups and business lobbies were successful in convincing the legislature to approve a $100 million incentive package aimed at luring insurers to write more property insurance in the state, especially in hurricane-vulnerable areas south of I-10. As of November 2007, six insurance companies, including two newcomers to the state, had applied for $34 million in matching grants from the program and Insurance Commissioner Jim Donelon said others had expressed interest.

Donelon also told Insurance Journal that in the latter half of 2007 Louisiana Citizens Property Insurance Company, the state’s insurer of last resort, had for the first time in its existence, seen a drop in renewals and new policies.

Windstorm woes
The Texas insurance industry was less successful in advancing legislation to revamp its property insurer of last resort, the Texas Windstorm Insurance Association. Agents, insurer trade groups and coastal legislators worked together to craft a measure during the 2007 session of the Texas Legislature to address funding for TWIA, which many believe is hugely underfunded should a major hurricane hit heavily populated areas of the coast, such as Galveston, Brazoria and Harris Counties.

House Bill 2960, introduced in early April, was not to be, however. It was changed so much during the last week of the session that coastal legislators, originally some its staunchest supporters, could not vote for it.

Still, there was some good news on the funding front for TWIA this year. In June, Texas Commissioner Mike Geeslin approved a portion of a proposal submitted by the association, which allowed for the purchase of $1 billion in reinsurance. TWIA had requested the purchase of $1.5 billion in reinsurance through a three-tiered proposal. Geeslin approved the first two tiers.

Then, in November 2007, Geeslin approved rate increases of 8.2 percent for residential and 5.4 percent for commercial properties covered by TWIA. The rate increases take effect Feb. 1, 2008. TWIA had requested a 10 percent increase for both commercial and residential properties in a filing made in August 2007.

Undaunted by the failure of HB 2690, proponents of TWIA funding legislation have vowed to continue to working toward the goal of beefing up the association’s reserves during the 2009 Texas legislative session.

Ark.: Proof of workers’ comp coverage needed
The Arkansas 86th General Assembly passed several bill related to workers’ compensation during the 2007 session, among them: new rules for residential contractors in Arkansas who own their own businesses. Residential contractor business owners may opt out of workers’ compensation coverage for themselves, but must purchase it for their business. As part of new rules under Act 398 of 2007, “residential contractors must provide proof of workers’ compensation coverage as a condition of licensure or renewal of an existing license.”

A bulletin jointly released in July by the Arkansas Workers’ Compensation Commission, the Arkansas Insurance Department and the Arkansas Contractors Licensing Board clarified that, “A residential contractor who is a sole proprietor, partner of a partnership, member of a limited liability company, member of a professional association, a self-employed employer, or an officer of a corporation may purchase a workers’ compensation policy and exclude himself or herself from coverage through the insurance contract. The exclusion request must be signed and dated by the person requesting to be excluded and must be submitted to the insurance company at the inception of the policy.”

All business owners who opt to exclude themselves must hold a Certificate of Non-Coverage, which is not and cannot be used as a waiver of workers’ compensation liability, the agencies said.