Louisiana Lawmakers Repeal ‘Three-Year Rule’ that Barred Policy Cancellations

Property insurers in storm-swept Louisiana could soon gain much more flexibility over policy cancellations if the governor signs House Bill 611 into law, as expected.

The state House of Representatives approved the bill by a vote of 82 to 15, sending it to Gov. Jeff Landry. It would repeal a decades-old law that has made Louisiana unique among the states and has barred carriers from canceling, nonrenewing or raising deductibles on policies that have been in effect for more than three years, except in cases of fraud, nonpayment of premiums and other exceptions.

If the bill becomes law, insurers will soon be able to cancel up to 5% of their policies each year, provided that the properties are not in one parish. The state’s insurance commissioner will be able to review and approve additional cancellations, the bill notes.

Insurers and Commissioner Tim Temple praised the bill and other measures passed by the Legislature this spring, arguing that the changes will help bring more competition to a market that has seen carriers go insolvent, pull out of the state, or raise premiums as multiple hurricanes have hit in recent years, according to local news reports.

The so-called ‘three-year rule’ has forced some insurers to raise rates because it has blocked them from managing risk through canceling or non-renewing risky properties, supporters of the bill have said.

Under the new rules outlined in the bill, the three-year rule will no longer apply to policies issued after Aug. 1, 2024. For policies in place before August, no more than 5% may be nonrenewed per year, contingent on approval by the commissioner, the bill explains.