Released: August 10, 2007

Insurance Commissioner Jim Donelon said today he wants to abolish the confusing and secretive layers of bureaucracy that are part of the management of the troubled insurer of last resort. Donelon said it�s all part of a shakeup and turnaround plan for Citizens Property Insurance Corp. designed to open it up to public scrutiny.

The bureaucracy Donelon wants to abolish is the Property Insurance Association of Louisiana (PIAL), which was at the management helm of Citizens Property Insurance Corp. when hurricanes Katrina and Rita hit. The hurricanes magnified whatever management shortcomings existed, said Donelon. Additionally, Donelon plans to introduce legislation to abolish the auto insurer of last resort called the Louisiana Automobile Insurance Plan (LAIP) and contract with the Automobile Insurance Plan Service Office (AIPSO) to perform those services as they do in virtually every other state.

At Donelon�s urging, the Citizens board recently hired John Wortman, an experienced insurance executive and consultant from Florida, as CEO to head up the turnaround efforts at Citizens. During the turnaround effort

Donelon came to the conclusion that PIAL should be abolished as well as services contracted for with the Insurance Services Office (ISO), as is done in approximately 45 other states.

PIAL was established in the late 19th century and traditionally has acted as a fire rating bureau for property insurance, providing a rating for insurance companies to help determine premiums based on fire risk. PIAL has also managed the Louisiana Automobile Insurance Plan, which is the high risk pool for motor vehicles and the Citizens Property Insurance Corporation.

Donelon also announced his intention to personally attend the next meeting of the board of PIAL to urge them to reject their Executive Committee recommendation to seek court action over the issue of whether they are a public or private agency. Instead Donelon said he will urge the board to instruct its attorneys to abandon any effort to resist PIAL functioning in all regards as a public agency from this point forward.

�It�s about the public�s right to know, and accountability,� said Donelon. "The convoluted way this thing is set up is Machiavellian.�

�Once you separate it from Citizens and LAIP, its fire rating services can be provided by a national organization, which all but a handful of other states use. Most other states utilize the Insurance Services Office, a national organization, because they find it to be cheaper and more efficient than if they performed the functions themselves," added Donelon. �PIAL�s function as a rating bureau is an anachronism out of the horse and buggy days.�

�I inherited Louisiana Citizens Insurance Corp., as well as PIAL and LAIP and once its management troubles became apparent I saw to it that a turnaround team was appointed. We are beginning to see results. But along the path of cleaning things up, we are going to turn up things that need to be corrected and LAIP and PIAL are among those things,� said Donelon.

�The more that this process is open to public scrutiny; the more likely it is that we will have accountability. I want to make sure that these entities are subject to the same requirements of any public agency.�

Louisiana is one of only a handful states that acts as a so-called �rating bureau,� meaning it inspects fire districts and assigns a number from one to ten which insurance companies use to assist in determine property insurance premiums. Texas and the District of Columbia, among the handful or original hold outs, eventually went with ISO because it was cheaper.