Headlines across Louisiana blared out in recent weeks that automobile insurance rates in the state will see a huge increase. State Farm, whose rate request was rubber stamped by the Department of Insurance, will increase its rates by an average of 17.3%. Progressive Insurance Company will increase just over 10% while Allstate will jump up 18%, GEICO by more than 19% and, get this, USAA will increase its rates by nearly 34%.
So what happened to all those reductions that Louisiana policyholders were promised when the legislature took away many policyholder rights several years ago? The reductions were supposed to be really big. By 25 % said the insurance commissioner. But when political courage wanes and politicians search for a quick fix to age-old problems, they often seek out a scapegoat to blame. “Passing the buck” on someone else is standard operating procedure at the state legislature in Baton Rouge. A number of new laws, all proposed by the insurance industry, made it more difficult for policyholders to sue in court.
It must be all the lawsuits, say the insurance companies. But a recent study by the U.S Chamber of Commerce’s Institute of Legal Reform showed that Louisiana is within the national average when it comes to per capita cost of lawsuits involving auto accidents. So lawsuits are a minor part of why Louisiana has such high insurance rates.
Anderson Cooper on CNN has done a series of reports (all available online) about how the nation’s top auto insurance companies deliberately drag out jury trials in an effort to wear down — financially and physically — those damaged in auto accidents. Many insurance departments turn the other way to this calculated effort by the insurance industry to lessen the amount it has to pay out.
And here’s what really should concern policy holders across the state. The cost of insurance actually doesn’t have a lot to do with how one drives their car. A whole list of non-driving factors figure into just what a driver is charged for car insurance. Many of the factors are ridiculous. A number of other states, with much lower insurance costs, prohibit the use of non-driving factors. Consumer reports released a study of what a driver with a DWI conviction is paying for auto insurance. With good credit, the driver with a DWI is charged as much as $900 less than a Louisiana driver with a perfect driving record but with poor credit rating. A driver who is a blue-collar worker pays more for insurance than a driver with a college degree. And how about this? A widow pays more than someone who is married. In fact, with some companies, just being a woman gets a driver paying more. Go figure.
So how did the legislature respond to efforts to lower insurance costs in this past legislative session? Legislation was introduced that would have banned the use of credit scores and occupation in rate-setting. But with strong opposition from the insurance industry and the Louisiana Insurance Department, this progressive change that would have helped Louisiana policyholders who were good drivers didn’t have a chance.
There are a barrel of reasons why Louisiana leads the nation in high auto insurance rates. It’s going to take a concentrated effort by legislators, the Governor and insurance officials to put a comprehensive program in place that will cause auto rates to go down. Looking for quick fixes by blaming lawyers, judges or any one group is disingenuous and will do little to address what has become a financial crisis for many drivers in Louisiana.
Don’t count on any premium reductions soon in the Bayou State. Much more needs to be done.
Peace and Justice
Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide. You can read all his past columns and see continuing updates at http://www.jimbrownla.com. You can also listen to his regular podcast at www.datelinelouisiana.com.