In 2020, the Louisiana Legislature decided drivers should be stripped of some of the legal tools they have to force insurance companies to pay legitimate claims. Legislators, powerful business lobbyists and the insurance commissioner promised the sacrifice – branded as “tort reform”—would be worth it because auto insurance rates would go down quickly and significantly, with some promising reductions as much as 25%.
Their promises have not materialized. One recent estimate of Louisiana’s auto insurance rates from insure.com shows a 19% increase since the passage of tort reform, with more increases expected.
Now, the same legislators and insurance commissioner who pushed through tort reform are standing in the way of efforts to lower auto insurance rates by holding the insurance industry accountable.
Unbeknownst to most Louisiana drivers, the amount you pay for car insurance doesn’t have that much to do with how well you drive. In reality, insurance companies use a range of non-driving factors to determine which customers are most desirable to them. These preferred customers are granted lower rates. In return, they punish everyone else with higher rates, regardless of their driving record.
Insurance companies weigh credit ratings so highly that a Consumer Reports study found that a Louisianan with a DWI conviction and excellent credit pays $900 less per year than a Louisianan with a perfect driving record and poor credit rating. But it’s not just good drivers with poor credit who are punished, insurance companies also charge more to Louisianans for having a blue-collar job, for not obtaining a college degree, for marital status or just for being a woman.
Unlike some other states – all of whom have lower auto insurance rates – our law allows the use of these non-driving factors. It’s a boon for the big insurance companies and a select few of our wealthy neighbors. Meanwhile, the rest of us pay a serious price.
It disincentivizes good driving and contributes heavily to what the insurance commissioner has said is one of the biggest problems increasing costs in our market; more than half of Louisiana drivers either drive uninsured or carry minimum liability coverage.
If our Legislature banned the use of non-driving factors, good drivers would see lower rates. And as good drivers purchased more coverage and wealthier drivers realized their bad behavior could cost them, the stability of our market would improve, lowering rates for everyone.
The Legislature had an opportunity to fix the problem this session with House Bill 351 from Rep. Edmond Jordan, D-Baton Rouge, which would have banned the use of credit score and occupation in rate-setting. Unfortunately, the insurance lobbyists wield tremendous power at the Capitol and have a powerful ally in Insurance Commissioner Jim Donelon, who helped them kill the bill in committee.
As our auto insurance rates continue to rise, hopefully our legislators and insurance commissioner will one day stand up to Big Insurance and stop letting lobbyists write our insurance laws. Only then will we see real insurance reform to hold insurance companies accountable and lower our rates.
Eric Holl is founder and executive director of Real Reform Louisiana, the state’s only consumer advocate focused on property and casualty insurance.
