House OKs bill to make it easier for companies to cancel home insurance policies

By Jacob Matthews | LSU Manship School News Service

The Louisiana House approved a bill this week to phase out a rule that a home insurer cannot cancel a customer's policy for three years except for lack of payment or fraud, sending it to Gov. Jeff Landry for his signature.

The bill is at the center of a high stakes push by the new insurance commissioner, Tim Temple, and Landry to reduce regulations on insurers to try to attract more of them to the state.

After a series of hurricanes in 2020-2021 — Laura, Delta, Ida, and Zeta — a dozen insurers became insolvent, leaving many homeowners with only the most expensive options.

But some lawmakers and other critics have said the new plan will hurt some residents in the short run. They also question whether insurers that return to the state will have the financial strength to survive amid predictions of more frequent intense storms.

House Bill 611, which would scrap the three-year rule, is the most notable of a package of bills sought by Temple. Under the bill, upon filing a plan with the commissioner, an insurer may decide not to renew up to five percent of its customers' policies per calendar year for any reason, provided that no more than five percent of the insurer's policies included within the plan to be dropped are in one parish.

Legislators also sent a bill to Landry this week that would allow insurance companies to raise premiums without having to get pre-approval from Temple's department. The insurance commissioner would then have 30 days to notify the insurer if the rates are rejected.

Temple said during one hearing that the "totality of everything we're trying to do to create a competitive market." He said that he believes that bringing more carriers to Louisiana would create more competition, and that would lower premium rates.

"I hear from people every day that can't afford their insurance, and maintaining status quo is not going to help us," Temple said.

But some lawmakers expressed concerns about deregulation, specifically in the short term before the market might theoretically correct itself.

Until then, many families could lose generational homes because they would be dropped from insurance plans and forced into the most expensive options, said Rep. Matthew Willard, D-New Orleans.

"My biggest concern with this bill right now is the impact that it will have on those policyholders who have protections from the three-year rule," Willard said.

Willard is also concerned that phasing out the rule will force people to turn to more expensive policies from Citizens Property Insurance Corp., the state's insurer of last resort.

Rep. Gabe Firment, R-Pollock, the author of HB 611 and an advocate for deregulation, argued for a long-term view of the problem. He said Louisiana is the only state with a three-year no-cancellation rule, and he identified that as the reason new insurers will not come into the market.

"By not allowing a strategic nonrenewal, you're penalizing everyone by forcing them to raise their premiums," Firment said at a hearing. "So look: If you want us to come in here this morning and say nobody will experience an increase in their premiums, I mean, we can't do that. But you know, if you look at the big picture, customers need options, they need choices, and this is a way to accomplish that."

There are a few bills this session that could help consumers. House Bill 257 raises penalties on insurers for failure to comply with certain directives issued by the commissioner of insurance, with fines of up to $1,000.

House Bill 120 helps both insurers and consumers long-term by extending the termination date of the Louisiana Fortify Homes Program, which provides state grants for consumers to fortify their roofs as protection from bad storms.

Researchers at Colorado State University are predicting an "extremely active" 2024 Atlantic hurricane season, citing warmer than normal temperatures in the Atlantic Ocean. Looking further ahead, scientists predict that the Gulf Coast will generally experience more frequent and intense hurricanes than in the past.