Louisiana Allowed Insurers To Drop More Homeowners. Only One Took Advantage.

Louisiana lawmakers passed a controversial law last year that gave insurance companies more leeway to drop policyholders, part of a fierce debate over how to tame ever-rising homeowners insurance rates that have reached crisis levels.

Consumer advocates and Democrats warned at the time that the state could expect mass cancellations of policies, exacerbating a crisis that has already hammered Louisiana homeowners. Insurance executives and Republicans, meanwhile, argued the change was needed to bring Louisiana more in line with other states and to invite competition into the market.

New data shows little has changed after the state repealed the policy known as the "three-year rule," which banned insurers from dropping policyholders who had been customers for three years.

Documents from the Louisiana Department of Insurance show that nearly a year after the change went into effect, only one company has filed the paperwork necessary to cancel policyholders who were previously protected by the three-year rule.

That company, Foremost Insurance, an affiliate of Farmers Insurance, canceled under 5% of its three-year-rule policies, meaning it doesn't need approval from the Insurance Department. Insurers are only required to notify the department, but do not need approval, if they want to cancel policies under the three-year-rule.

Foremost, which has about 2% of Louisiana's home insurance market, has also raised rates on several thousand homeowner policies in the past year. Spokesperson Luis Sahagun said the increase reflected the risk level of the homes, along with inflation and other factors.

"As part of an ongoing risk management program, we have notified LDI of our plan to nonrenew a small portion of our existing customers," Sahagun said.

It's not clear why other companies are not yet taking advantage of the law, and some could still cancel policyholders in the coming years. State Farm and SureChoice, the two largest insurers doing business in the state, declined to comment.

But the lack of interest in using the new law is the latest indication that Louisiana's insurance crisis has, for the most part, remained stubbornly unchanged more than four years after Hurricane Ida sent the market into turmoil.

State Rep. Gabe Firment, who sponsored the law repealing the three-year-rule, said he wasn't aware that only one company had used it so far. Still, he said the law was part of a package of changes having a positive impact on the market. He noted that even if companies aren't canceling policyholders, they benefit from new policies not being subject to the three-year-rule.

Firment, a Pollock Republican, said homeowners should shop around with different insurers and agents, saying some find lower rates by comparing policies.

"Things have improved slower than what we hoped," he said. "But if you look at the affordability crisis across all sectors ... that's impacting people. If groceries are more and gas is more and electricity is more, then man, when insurance is still so high, it just hurts that much more."

Flurry of changes

After he took office in 2024, Insurance Commissioner Tim Temple pushed for a slew of changes to address the state's "heavy handed" regulations on insurance companies. Temple, a Republican, is a former insurance executive.

His predecessor, Jim Donelon, championed the three-year rule as a way to help ensure continued coverage for policyholders who otherwise could be dropped. Donelon also used tax incentives to lure smaller insurers to the state, but many of them went belly-up after the particularly busy 2020 and 2021 hurricane seasons.

The Legislature, which is dominated by Republicans, passed Firment's bill in 2024 to phase out the three-year rule on a largely party-line vote. Republican Gov. Jeff Landry, who took a back seat on homeowners insurance issues last year, signed the bill into law, though he has since said the pro-industry reforms aren't working.

The bill went into effect in January 2025. By then, lawmakers had also suspended the 10% surcharge adding to the cost of homeowners' insurance with Citizens, the insurer of last resort. Temple and other Republican leaders embraced the move to bring down the costs of Citizens in part to prevent an influx of homeowners from having to pay more after being canceled by their insurer.

John Ford, spokesperson for the Insurance Department, said the three-year rule hurt Louisiana's market by making insurers and reinsurers hesitant to invest here. And he noted that Louisiana was the only state with such a law.

"Insurers move slowly, and the three-year rule nonrenewal plan submission process is new as of this year," Ford said. "We may see more insurers go through that process as they learn more about it, but now that insurers can effectively manage their risk, they are likely more comfortable with their overall books of business."

Little change to crisis

Meanwhile, though, homeowners' insurance rates have continued rising since Temple's package of bills became law. While the Insurance Department recently touted SureChoice's decision to cut rates for homeowners, that same company had raised rates by a larger amount months earlier. State Farm raised rates this fall, citing hurricane risk. And through November, homeowners across the state saw an average rate hike of about 5%.

And Landry's strategy — a controversial new law that allows Temple to reject "excessive" rate increases — has also not made a difference. Temple has vowed not to use the new authority, saying it would harm the market.

Rodney Braxton, head of the industry group Insurance Council of Louisiana, said insurers likely don't feel the need to cancel more policies under the three-year-rule because the market is stabilizing.

But while Louisiana hasn't had a major hurricane in four years, he added that insurance costs go up every year, regardless of whether there's a catastrophe, because of inflation and other factors. Homeowners will likely continue to see small increases in costs in the coming years, he said.

"A lot of people were scared there would be a wholesale dropping of clients," he said. "It's just something that offers insurance companies more ability to manage their risk."

Andreanecia Morris, head of the nonprofit HousingNOLA, lobbied against the repeal of the three-year rule in 2024, warning it would hurt policyholders.

Now, Morris said the data showing only one company has canceled policies under the new law shows the three-year rule "was not the problem."

Instead, Louisiana should dedicate more funding to building stronger roofs, which have led to lower insurance premiums for thousands of people and gotten them off the rolls of Citizens, she said.

"Ending three-year rule, ending consumer protections," she said. "Are we going to see in 2026 a Legislature that's ready to take the next step?"

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