La. House Panel OKs Homeowners Insurance Deductible Restriction

April 30, 2009

Insurance companies should be restricted in their use of so-called “named storm” deductibles in Louisiana, even though the change will probably trigger a rate increase for homeowners, a House committee voted on Wednesday.

Insurers in Louisiana and other states have special deductibles that apply only to damage caused by hurricanes and tropical storms named by the National Hurricane Center. State law now allows firms to impose the deductible more than once per year if two or more named storms hit Louisiana in one hurricane season.

The House Insurance Committee approved a bill to allow firms to activate such a deductible only once per storm season. The proposal would not affect homeowners until after this year’s hurricane season.

An average rate hike of 1.5 percent to 2 percent would probably follow, though Donelon said it was a fair tradeoff, because homeowners will eventually take comfort in knowing they won’t have to face multiple expensive named-storm deductibles _ some of them up to 5 percent of a home’s value _ in one season.

A rate hike is “a small price to pay, in my judgement,” he said.

The panel amended the bill to exempt surplus-line insurance companies, which make up a small percentage of the market. Surplus-line firms operate under crisis conditions _ such as St. Bernard Parish after Hurricane Katrina _ when the large firms stop writing policies.

The measure, sponsored by Rep. Charles Kleckley, R-Lake Charles, is modeled after a Florida law created after the state was hit by three hurricanes in 2004, Donelon said. It moves to the House floor.

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