BusinessReport.com

Louisiana isn’t always an easy place to buy insurance. But there may be some good news for local businesses looking for workplace liability insurance: Some agents say the price and selection is improving, even for companies like general contractors who traditionally have a lot of trouble finding affordable coverage.

Jim Zimmermann is vice president of insurance for Cory, Tucker & Larrowe, a firm that specializes in bonds and insurance for the construction industry. Zimmermann says there’s no question the nationwide liability insurance market is soft; that is, buyer-friendly. Louisiana isn’t seeing the same level of softening as neighboring states, but he says the market has stabilized, and companies with good loss histories may see small price reductions.

The current national cycle can be traced back to the 9/11 terrorist attacks, after which many insurance companies “took it on the chin,” Zimmermann says, leading to big rate increases.

From 2002-04, insurers turned record profits and built up their capital and surplus. After awhile, companies got the urge to do something with that surplus, to use that money to make more money. That meant becoming more competitive and lowering rates to write more businesses, a trend Zimmermann expected to continue for the near future.

For commercial contractors, there are a number of choices and better prices, Zimmermann says. But residential contractors have it much tougher, which Zimmermann says is a point of contention between him and the insurance companies. He says the distinction might make sense if a builder is working on a condominium complex, because if there’s some sort of construction problem, he could have 100 people suing him.

But even for companies building houses, it can be really hard to get reasonably priced coverage, and the high minimum premiums can really put a squeeze on the smaller guys, Zimmerman says. Theoretically, if someone’s building a 500-house tract, one defect multiplied by 500 could lead to a large multi-claimant suit, but those sorts of developments are rare in Louisiana, he says.

Jeff Albright, CEO of the Independent Insurance Agents and Brokers of Louisiana, agrees that the liability insurance market is softening after a few hard years. The liability market doesn’t exist in a vacuum. Most companies package different risks together, so the hard market for things like property and casualty insurance in coastal parishes, and indeed in southern and eastern coastal states in general, means a harder market for liability insurance as well.

So Alexandria is more competitive than Baton Rouge, which in turn is more competitive than the problematic coastal parishes. A company unable to get a comprehensive business owner policy from a big-name insurer might be forced into the higher-priced, lightly regulated secondary market, where the insurers are more willing and able to get creative and break up the risks into separate policies, Albright says. But no one, he stresses, should do without.

“Every business has the potential to be sued,” Albright says. “The larger and more hazardous, the more likely to get sued.”

Albright advises businesses looking for coverage to shop around to find a fair price for the coverage they need, but don’t shop too often. A business that changes insurers every year may start to look like a bad risk to an insurance company, he says.

“In today’s world, I don’t know how anyone could function without it,” agrees David Hall, a regional section manager for innovation and small business solutions with State Farm Insurance. “Everyone wants to make sure everyone else is insured.”

But from State Farm’s perspective, the Louisiana market isn’t getting any softer, partly because of lingering post-Katrina uncertainty and partly because of the state’s legal and regulatory environments, Hall argues.

“Louisiana is a very litigious state,” he says. Louisiana has a $50,000 threshold for a jury trial; no other state has a higher threshold than $15,000, and 36 have no minimum at all, Hall says, which may encourage lawsuits because judge-only trials are generally less expensive. He also says there’s a perception that judges tend to favor the “average Joe.”

There’s also a perception that Louisiana regulates its insurance market with a heavier hand than most states, scaring off companies that might otherwise want to write business here. But he says the state has made strides in that area under state Commissioner of Insurance Jim Donelon and former commissioner Robert Wooley, and says the abolition of the politically appointed Louisiana Insurance Rating Commission also helps.