The Louisiana House voted Wednesday to allow insurance companies more leeway to drop homeowner policies, a move supporters say will help solve Louisiana’s insurance crisis. The companies are currently banned from dropping homeowners who have been customers for at least three years. 

Rep. Gabe Firment, sponsor of the legislation, House Bill 611, said it is badly needed because Louisiana is the only place in the world that imposes the three-year restriction on insurance companies that his bill would repeal.

The vote was 72-32, with Republicans strongly supporting HB 611, while Democrats voted in opposition.

“Passage of HB 611 will simply bring Louisiana into alignment with other states and help create a more stable environment based on free market principles and competition,” Firment, R-Pollock, told the House.

Firment’s bill now advances to the Senate, where similar legislation, Senate Bill 370, by Sen. Adam Bass, R-Bossier City, won approval on a 28-9 vote on Tuesday.

Under the legislation, insurance companies could drop no more than 5% of their policyholders in a single parish each year, unless the insurance commissioner specifically authorizes more. That would happen only in rare circumstances, Firment hastened to add.

Rep. Matthew Willard, D-New Orleans, spoke against the bill, saying he feared that it would lead insurance companies to drop their riskiest 5% of policyholders, particularly along the coast next year.

“We know that homeowners’ insurance is unaffordable across the board,” Willard said. “The three-year rule is the best consumer protection that consumers have.”

The tallies in each chamber indicate that one of the versions is likely to win final passage in the coming days.

Firment’s bill is a major part of a package of 19 pieces of legislation pushed by Tim Temple, the new insurance commissioner. He was elected unopposed last year after promising to deregulate the industry with the argument that it would prompt more companies to write policies in Louisiana. Having more competition here, Temple believes, will stem soaring insurance rates.

Temple, who watched the debate from the side of the House chamber Wednesday, has said to blame him if his measures are passed and don’t address the problem. Gov. Jeff Landry supports Temple’s efforts but is letting him take the lead on insurance.

Jim Donelon, who preceded Temple as insurance commissioner for the past 18 years, strongly supported the so-called three-year rule, saying that it kept down rates in Louisiana by forcing insurers to keep their policyholders.

Real Reform Louisiana has warned that passage of the legislation would cost homeowners their policies, and they would then have to get coverage from the state’s insurer of last resort. Those rates are 10% higher, the group points out.

The bill would take effect on Jan. 1, “well after hurricane season has passed,” Firment said.

He said statistics are not available on how many homeowners benefit from the three-year rule, so no one can say how many might lose their policy if insurance companies drop 5% of them.

“This is going to be a very refined, precise and surgical non-renewal,” Firment said. “It’s very minimal.”

But Rep. Edmond Jordan, D-Brusly, questioned whether significant numbers of insurance companies will want to write more policies in Louisiana.

“None of them have said if you drop the three-year rule, they will definitively come here,” he said.

In related business, the House also approved legislation, 85-16, that would end a practice in Louisiana known as “direct action” that allows injured people seeking a damage claim to sue insurance companies as well as the person who allegedly caused the injury. The legislation is House Bill 373 sponsored by Rep. Jack McFarland, R-Jonesboro.

Juries hearing that deep-pocketed insurance companies could be on the hook for damages are more likely to award bigger claims, McFarland told the House, saying that Louisiana is among only a handful of states that allow direct action lawsuits.

“This bill does not in any way affect or remove an insurer’s obligation to pay damages,” McFarland said. “That’s why we have insurance.”

Rep. Wilford Carter, D-Lake Charles, and Rep. Robby Carter, D-Greensburg, said they doubted McFarland’s legislation would actually lower or limit insurance rates.

On Wednesday morning, the House Insurance Committee also advanced bills that would add more mediation and arbitration options to the claims process. They are part of the effort to reduce insurance-related litigation.

House Bill 510 by Rep. Brian Glorioso, R-Slidell, would allow property insurance companies to include a clause providing for mandatory binding arbitration. Those policies would have to be discounted, and companies would need to offer consumers alternative options without such a clause.

Companies would also need to notify customers about the clause in a separate document attached to the policy.

The committee advanced that bill without objection.

House Bill 609 by Firment, which is part of Temple’s package, also cleared the committee without objection. It applies to home insurance and would create an appraisal process for when insurance companies and claimants disagree on how much of a loss an insurance company should cover.

If either the insurer or the claimant requests an appraisal process, each party would select an appraiser and pay their fees. If the appraisers do not agree, an umpire would be assigned to the case.

Both HB 510 and HB 609 now head to the full House for consideration.

Staff writer Meghan Friedmann contributed to this article.