Louisiana House OKs Bill on Regional Storm Deductibles

June 12, 2008

Insurance companies should be allowed to adjust their so-called “named storm” deductibles on homeowner policies, depending on properties’ distance from the hurricane-prone Gulf of Mexico, according to a bill approved by the Louisiana House of Representatives.

Louisiana is the only state that requires insurers to set a statewide deductible — meaning properties hundreds of miles inland must have the same deductibles as those along the Gulf, where catastrophic damage from hurricanes is far more likely.

The bill by Sen. Don Cravins Jr., D-Opelousas, would change that, but only for “named storm” deductibles, those triggered when damage to a property is caused by a named tropical storm or hurricane.

The House approved the bill with a 92-7 vote, sending it back to the Senate.

Under the bill, the Department of Insurance would create a map of Louisiana with zones outlining which areas could have deductibles at which level. Insurers would then be able to set different deductibles on properties in different zones.

The bill also would put a 4 percent cap on named storm deductibles, meaning some homeowners with Allstate Insurance Co. would see a reduction in their deductible. AllState recently raised deductibles to 5 percent on homeowners with policies three years old or less.

Opposition came from south Louisiana lawmakers who argued that existing state law should be maintained because it treats all homeowners equally.

Supporters fought off an amendment from one of those opponents, Rep. Jerry Gisclair, D-Larose, that would have required companies writing policies in north Louisiana to also write policies along the coast — a part of the state most insurers avoid because of hurricane risk.

Speaker Jim Tucker said the amendment represented an unnecessary government intrusion into free markets. He said it would strangle the progress Louisiana’s insurance market has seen since hurricanes Katrina and Rita in 2005.

Tucker, R-Terrytown, said Gisclair’s proposal would deter “the insurance business from coming into Louisiana, which will only keep rates high.”

The House rejected Gisclair’s amendment with a 19-71 vote.

Cravins had a similar bill last year that passed both legislative chambers, but a panel of House and Senate members could not agree on a compromise version.

On the Net: Senate Bill 160 can be found at http://legis.state.la.us/

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