The Louisiana House has passed a bill granting insurers increased flexibility to cancel homeowner policies, a decision framed by proponents as a crucial step towards addressing the state’s insurance crisis.
Currently, insurers are prohibited from discontinuing coverage for homeowners who have been policyholders for a minimum of three years.
The legislation, House Bill 611, spearheaded by Representative Gabe Firment, aims to eliminate this unique three-year safeguard. Firment, a Republican from Pollock, has characterized the bill as essential for rectifying Louisiana’s distinctive position on this matter globally.
According to Nola, the measure received a vote of 72-32 in favor, with the majority of Republican lawmakers endorsing HB 611, and their Democratic counterparts dissenting.
Firment argued that the bill’s enactment would align Louisiana’s practices with those of other states, fostering a more stable insurance market through the principles of free enterprise and competition.
Following its approval in the House, HB 611 now proceeds to the Senate. There, it joins a related proposal, Senate Bill 370 by Sen. Adam Bass (R-Bossier City), which recently secured a 28-9 vote of approval.
A key stipulation of the proposed legislation is the limitation placed on insurers, restricting them from canceling no more than 5% of their policyholders in any given parish per year, barring exceptional circumstances as authorized by the insurance commissioner.
Opposition voices, such as Representative Matthew Willard (D-New Orleans), expressed concerns that the legislation might lead insurers to terminate coverage for their most vulnerable 5% of policyholders, particularly those residing in coastal areas, next year.
Willard also emphasized the significance of the three-year rule as a pivotal consumer safeguard amid widespread unaffordability of homeowners’ insurance.
The legislative developments come as part of a broader initiative comprising 19 bills endorsed by Tim Temple, the state’s newly appointed insurance commissioner. Temple, who assumed office after a campaign promising deregulation to encourage more insurers to operate in Louisiana, views increased market competition as a remedy to the escalating insurance costs.
Governor Jeff Landry has shown support for Temple’s strategy, allowing him to spearhead insurance-related matters.
Former insurance commissioner Jim Donelon, an advocate of the three-year rule, argued that it played a vital role in moderating insurance rates by obliging insurers to maintain their client base.
Critics like Real Reform Louisiana caution that the bill’s passage might lead to a surge in policy cancelations, pushing homeowners towards the state’s insurer of last resort, known for rates that are typically 10% higher.
Should it become law, the bill is set to take effect on January 1, bypassing the hurricane season.
Despite the potential impact, specific data on how many homeowners currently benefit from the three-year rule—and consequently, how many might be affected by its repeal—remains unavailable. Firment described the anticipated policy cancelations as minimal and highly targeted.
However, skepticism remains regarding the bill’s capacity to attract more insurers to the state, with another Democrat representative highlighting the absence of firm commitments from insurers to enter the Louisiana market if the three-year rule is abolished.
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