Louisiana appears headed in a new direction when it comes to insurance regulations. 

After 17 years in office, incumbent Insurance Commissioner Jim Donelon will step down at the beginning of 2024. He will be replaced by fellow Republican Tim Temple, the former owner of a family insurance business who ran unopposed for the position.

Temple plans to lean heavily into a “free market” approach to managing the state’s insurance industry, one that involves less regulation and rules. He believes those restrictions have prevented more insurance companies from doing business in Louisiana. If they were lifted, he said, the number of companies willing to write policies would increase, and insurance rates would decrease.

“Insurance companies do not have to do business in the state of Louisiana,” Temple said. “They chose to do business in the state of Louisiana.”

But to many, including Donelon, the changes Temple looks to make could soften consumer protections.

Traditionally, proposals like Temple’s also struggle to gain approval from the Louisiana Legislature, in spite of major pushes from the insurance industry.

Making it easier for insurance companies to shed policy holders 

Temple wants to weaken what’s known as the three-year rule, a law unique to Louisiana that makes it very difficult for an insurance company to drop a client if the insurer has written the client’s insurance policy for three years.

Temple said the law is problematic because it “marries the insurance company with the consumer and doesn’t allow the insurance company to get divorced. It doesn’t allow the company to manage their risk.”

“Why would an insurance company want to come and do that?” he asked.

By contrast, Donelon had been supportive of this provision, characterizing it as a consumer protection measure. In an interview with The Times-Picayune, Donelon said the three-year rule prevents insurers from dropping large numbers of policy holders following a natural disaster.

A bill that would have watered down the three-year rule also failed early on in the state legislative process this year. The legislation, sponsored by Rep. Francis Thompson, R-Delhi, was rejected on the House floor 56-39, failing to advance to the Senate.

Make it more difficult to sue insurance companies

Temple said he supports efforts to amend the state’s “bad faith” law that makes it easier for property owners to sue their insurance companies when they encounter problems with their claims.

Clients successful in their lawsuits can receive up to 50% more money in legal damages than the amount they were supposed to be paid for the insurance claim, plus extra funding to cover their attorneys’ fees.

The Louisiana Association of Business and Industry has also pushed an overhaul, saying the bad faith clause makes it too expensive to do business in the state. Temple agrees that it deters insurance companies from writing policies in Louisiana.

Lawmakers rejected an effort to weaken the bad faith clause in the most recent legislative session. The Senate, in a 25-13 vote, approved an amendment to a bill by Rep. Mike Huval, R-Breaux Bridge, that stopped the legislation from watering down those protections.

Temple said he wants Louisiana to adopt a bad faith clause closer to those in Texas and Florida, which give insurance companies more opportunities to challenge the grounds of a lawsuit over unpaid or delayed claims.

Allowing rate increases more than once per year

Temple intends to remove a restriction Donelon put in place that blocks insurance companies from raising their rates more than once annually.

“Let the free market — not a regulatory body, not the government — dictate when they can change prices,” he said.

Temple and others have said allowing rates to go up more than once per year could result in lower overall premiums for consumers. If insurance companies don’t have to predict their costs several months into the future, then they may be able to make smaller, more accurate adjustments to their prices.

Lifting this block will not mean insurance companies will raise their rates several times a year, Temple said.

“[Insurance companies] are not like a gas station. Rate changes are very expensive. They have to get actuaries involved,” he said. “They don’t just flip it back and forth every month.”

Allowing insurers to ‘cherry pick’ new policies

Temple said insurance companies should be able to pick where they want to write insurance policies in Louisiana  — and they shouldn’t be forced to cover every parish in the state.

“I would be 100% opposed to that,” Temple said. “I guess you would call that socialism?… There is no right to insurance that I am aware of.”

That sentiment is in stark contrast to what most major candidates for governor in Louisiana have said. Many believe insurance companies shouldn’t be able to “cherry pick” where they want to offer coverage. If they are going to write policies in one area of Louisiana, then they have to cover all of Louisiana, they said in interviews last month.

Decoupling types of insurance coverage

Temple said it may help Louisiana to unwind comprehensive insurance policies so that the government can step in with pools of coverage for limited issues.

For example, private insurance companies could offer homeowners insurance that doesn’t cover hurricane or wind damage, and the state could then use government-backed programs to cover those specific circumstances.

Temple says Texas uses this strategy. Wind and hail damage along the Texas coast is covered by a state-backed insurer of last resort, but other types of damage coverage — fire, for example — are still provided by a private insurer.

No more incentives for insurance companies or fortified roofs

Temple is not interested in putting more money into an incentive fund Donelon pushed meant to attract more insurance companies to Louisiana. He also doesn’t necessarily support expanding the state’s grant program that allows residents to upgrade their roofs. 

“I have mixed feelings about a prolonged government grant process,” he said. “I don’t think the government needs to be in the business of helping people build homes.”

Temple is pushing to make his proposed changes to property insurance laws in a special session that he wants scheduled “as soon as practical after everyone gets sworn in Jan. 8.” 

“We can’t wait until Jan. 8 to start talking about the special session and what needs to be included in that call,” he said.