Louisiana Insurance Commissioner Rejects State Farm Deductible Plan

January 28, 2013

Insurance Commissioner Jim Donelon has rejected a request by State Farm Fire & Casualty Co. to introduce a regional deductible for homeowner’s coverage.

Donelon tells The Advocate State Farm, Louisiana’ largest insurer, with more than 300,000 homeowner’s policies or 29 percent of the market, is the first company to request a regional deductible plan.

A 2008 state law allows insurance companies to propose a mandatory, minimum storm deductible in an individual parish, according to the Insurance Department. The hurricane deductible can be up to 4 percent of the insured value of the property. For a $200,000 house, a 4 percent deductible would be $8,000.

Before the 2008 law, insurers could not increase deductibles on policies that had been in effect for more than three years unless the insurance company increased the deductible for every policy in the state.

The Insurance Department said a regional deductible request must include a business plan that meets 10 criteria, including a plan to write new business in the parish where the regional deductible would be implemented.

In a rejection letter to State Farm dated Nov. 9, Donelon said State Farm’s plan made it clear the company did not intend to write any new business in the area where the regional deductible would be put in place.

“The proposal submitted by State Farm failed to meet the requirements set forth by law,” Donelon said Thursday. “The regional deductible plan submitted by State Farm neither illustrates the company’s intent to write new business nor denotes how the plan is in the best interest of policyholders.”

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