Leaders of Louisiana’s Republican Legislature have promised to enact legislation designed to lower the state’s auto insurance rates that are second highest in the nation. They believe many lawsuits filed by trial lawyers that are heard by friendly judges are the main reason rates are high.
Rates in this state average $2,298 per year, compared to the national average rate that is $1,548 per year.
The GOP has the votes necessary to do what is called tort reform, but will that actually lower rates? Sen. Kirk Talbot, R-River Ridge, is a former state representative who tried to pass an omnibus insurance bill last year when he was chairman of the House Insurance Committee, but it was killed in a Senate committee dominated by attorneys.
Talbot’s bill would have lowered the jury threshold from $50,000 to $5,000, sending more trials to juries instead of judges who now hear all cases lower that the $50,000 threshold. It would have also extended the time to file a lawsuit from one year to two, giving both sides in a lawsuit more time to settle the case.
Persons who file lawsuits would have also been limited in what they could collect from insurance companies for injuries. Although a driver’s insurance company would pay damages, it wouldn’t be named in the lawsuit.
When pressed by senators, Talbot admitted he got no commitment from insurance companies that his bill would lower rates.
The Advocate earlier this month reported that the insurance industry said tort reform wouldn’t lower rates. The newspaper said about 40 percent of Louisiana drivers carry the absolute minimum insurance coverage, and they pay an average of $705 annually, among the lowest rates in the country.
Bad credit ratings also increase auto insurance premiums, and Louisiana drivers with good credit have lower rates, the newspaper said. It added that the Property Casualty Insurers of America put litigation at the bottom of the list of factors affecting auto insurance premiums. Other factors affecting rates are urban congestion, distracted driving and poorly maintained roads.
Louisiana’s insurance system got the nation’s only F grade from the R Street Institute, the newspaper said, and litigation wasn’t mentioned. The institute is a free market think tank in Washington, D.C. It placed more blame on the fact that Louisiana has an elected state insurance commissioner who can decide whether insurance companies can raise rates.
The Advocate quoted the chief lobbyist for the auto insurance industry who said many other factors drive up the cost of insurance.
Kevin Cunningham said, “It’s a misnomer to ever really believe that your rates are going to go down. There are so many pressures for it to go up: medical costs continue to go up, the cost of vehicles continues to go up, the amount of wages that you have to compensate for continues to go up.”
That report by The Advocate drew an immediate response from a Gonzales insurance agent who said it was wrong on the facts and wrong on the conclusion.
Bret Hughes, in a letter to the newspaper, said, “The ‘tort reforms’ in question are all changes to bring Louisiana laws, which are significantly different from other states, into line with the rest of the country. If we want to pay lower premiums like other states, we need laws like other states.”
Hughes said Louisiana is in an automobile insurance crisis. Many companies won’t do business in the state, he said, and businesses with high-risk automobile fleets can’t get insurance.
Daniel Erspamer, the CEO of the Pelican Institute for Public Policy in New Orleans, agreed with Hughes in a guest column in The Advocate.
Erspamer said, “From skyrocketing car insurance rates to frivolous lawsuits, reports show the state’s legal system is directly costing Louisianans more than $4,000 per year, which is more than 20 percent higher than the national average.”
The Senate committee that killed Talbot’s bill last year is different this time around. It has a Republican investment manager as its chairman, three other GOP members and three Democrats who are attorneys. Last year’s committee had six attorneys and one businessman.
Rep. Sherman Mack, R-Albany, said he is planning to pursue Talbot’s omnibus bill that failed last year. However, he said he would introduce it as three separate measures in an attempt to make it easier to pass.
What can we take from all of this?
Auto insurance rates are an extremely complex issue. We can’t be sure what it will take to bring them down until some solution is tried. The odds are a tort reform bill in some form will be enacted this year.
What about those other causes for higher rates? Are legislators going to do anything about bad roads and bridges, better enforcement of seat belt, distracted driving and DWI laws and the insurance industry’s use of credit ratings to determine rates?
Whatever they end up doing, don’t expect it to lower auto insurance rates overnight.