Insurance Transparency Project

Insureds,

This Times-Picayune story says that the contractor running the state-owned insurance company in Louisiana lost financial records for the last two years, 2005 and 2006, making it impossible, among other things, to detect whether the company had been defrauded.

News of the problem: “…shocked many of those at the auditor’s meeting because of the implications for customers, bondholders and the state insurance market’s ability to cope with future catastrophes. At least several Citizens board members were unaware of the problem until this week….

The state officials began to come to grips Tuesday with the possibility that Citizens’ financial activities for the past two years might have to be reworked page by page for every transaction conducted in those two years, a daunting task that by one estimate could take 18 months. It was not clear Tuesday whether Citizens even has the paperwork available to reconstruct the full records.”

The problem came to light last month when a Metairie accounting firm auditing Citizen’s books quit, saying it couldn’t get access to the company’s financial records. Legislative Auditor Steve Theriot looked into the matter and told the board about the software debacle last week.

Citizen’s had hired a local trade group, Louisiana Property Insurance Association, to provide back-office services, and PIAL had in turn hired the software contractor.

Now, get this: PIAL had fired the (unnamed) software contractor in October, but didn’t tell the board why, leading the Times-Pic quite properly to make this observation:
“The software trouble might have been evident to the insurance association for months.

Then there’s the furniture thing:“Theriot also said that Citizens had paid for $1 million in furniture that the insurance association was supposed to have acquired, but no title transfer of ownership has been made to Citizens.”

What kind of gold-plated neo-Baroque furniture costs $1 million in New Orleans?

PIAL’s site is down.

The board only found out about the software snafu last week, when Theriot told them.

What about Citizen’s management?

“It was not known Tuesday how long the managers of Citizens had known about the problem, and why they hadn’t informed the full board of Citizens. “

Who runs Citizens? Don’t look on its website.

You can find the board on ITP, however, at the bottom of this item.

The chairman is someone named Chad Brown, whom the Times-Pic identifies as an insurance department official, meaning he reports to Insurance Commissioner Jim Donelon, who attended the meeting with auditors.

And as the story tells us: “One of the regular complaints about Citizens among some legislators is that the insurer’s board is too heavily weighed toward insurance industry representatives.”

ITP would only add that it was this same board of directors that hired A.I.G.’s Audubon unit to administer the program — a decision that led to chaos when the Audubon contractor expired on Sept. 16 — hurricane season — when Katrina hit.

As ITP and Al Crenshaw reported for my favorite newspaper before there was an ITP:

“Charles R. Schader, AIG’s senior vice president for claims, said that before Katrina hit, the AIG unit had halved its staff in anticipation of the contract’s end. He said the unit agreed to stay on, bringing in additional staff members and housing them in recreational vehicles. The unit is processing 60,000 new claims, following 15,000 to resolution and referring the rest to new vendors taking over the contract. The new vendors may have mishandled some claims, he said.

“Everyone is scrambling to throw all the resources we can at it,” he said.

Read the whole story in the Key Documents section of ITP. But I can’t resist this:

“Louisiana’s insurance commissioner, J. Robert Wooley, said the company was working to solve the problems and urged homeowners to have patience. ‘This is a marathon, not a sprint,’ he said.”

Wooley, it must be said, bonked before the finish line, resigning the February after Katrina to take a job with a law-lobbying firm, Adams and Reese, with insurance industry clients and personally represents a group of insurers known as ProtectingAmerica.org.

As the Times-Pic wrote: “Former Louisiana Insurance Commissioner Robert Wooley has come in for criticism for his work with ProtectingAmerica.org, an organization of insurance companies and other groups advocating the creation of federal and state catastrophe funds.”

The consumer Federations’s Bob Hunter described ProtectingAmerica.org as a “fronting organization for Allstate.”

Wooley defends himself here:

Wooley has responded by noting that his lobbying work is for ProtectingAmerica.org, not for the member insurance companies, and that most of that work has not been done in Louisiana.”

Thanks, I think, to The Cool Texan.

LOUISIANA CITIZENS BOARD OF DIRECTORS: