Louisiana Proposal Could Increase Property Insurance Costs

A proposal in the Louisiana state Legislature to reduce the maximum deductible on named storms and require winds in excess of 125 miles per hour before the deductible could be applied would likely result in higher insurance costs for consumers if enacted, according to the National Association of Mutual Insurance Companies, a national property/casualty insurance trade association.

Paul Martin, NAMIC’s state affairs director for Louisiana, said higher deductibles help insurers provide homeowners products in high-risk areas at an affordable premium level. He added that implementation of a new wind-speed threshold is also highly problematic. H.B. 549 proposed both changes.

“Insurers doing business in Louisiana need flexibility in order to do business in the state,” Martin said. “These two changes in how insurance is done in Louisiana would likely end up costing most consumers more.”

In a letter to members of the House Insurance Committee, Martin expressed concern over changing the maximum deductible for named storms or hurricanes from 4 percent down to 2 percent. “While we certainly recognize that large deductibles can be significant for homeowners, we would stress that such deductibles help make insurance coverage available and premiums affordable for Louisiana residents. Lowering the maximum deductible for named storm coverage will not do anything to make insurance premiums more affordable or to entice more insurers to do business in Louisiana,” he wrote.

On the subject of wind speeds, Martin cited concerns that the proposal lacked specificity on how and where the wind speed measurement must be taken, or the measurement’s proximity to the insured property. “This provision creates a tremendous amount of ambiguity,” Martin wrote. “Wind speed readings can vary greatly across short distances and heights above the ground. Further, the bill provides no standards by which equipment used to measure wind speed can be qualified as sufficiently accurate for use in triggering the separate deductible.”

Because of these concerns, Martin said the Louisiana Legislature should think twice about implementing policies that have an adverse effect on insurance costs in the process.

Source: National Association of Mutual Insurance Companies