Opinion: The fox is guarding Louisiana's insurance crisis

Photo submitted by Ben Riggs

Louisiana drivers pay more for auto insurance than drivers in any other state except Florida. To make matters worse, the five largest insurers recently announced they are raising rates again. Louisiana needs real insurance reforms that increase competition, lower costs and hold big insurance companies accountable. Instead, we keep getting higher rates and threadbare talking points from the insurance industry.

To solve Louisiana’s insurance crisis, we must stop letting the fox guard the hen house by listening to big insurance companies about how to lower rates. Big insurance companies want to increase their profits, not lower your rates.

Take so-called “tort reform,” for example. Tort reform refers to legislation that makes it harder for victims to be compensated for their injuries. Three years ago, insurance lobbyists and industry-friendly lawmakers promised that “tort reform” would lower auto insurance rates. Commissioner Jim Donelon predicted a 25% reduction. The former president of the Louisiana Association of Business and Industry vowed to march on the Capitol with “tiki torches” if rates didn’t come down in a year.

It’s been three years since the legislature passed tort reform. I have not seen one tiki torch, but we’ve all seen consumer rights weakened and auto insurance costs skyrocket. Tort reform did not lower costs because litigation is not the cause of high insurance rates. Tort reform is a distraction deployed by the insurance industry to conceal the real reasons for high auto insurance rates.

For starters, big insurance companies use non-driving related factors, like credit rating, to set the price of auto insurance. Safe drivers with poor credit pay 111% more than safe drivers with excellent credit in Louisiana, according to a recent Consumer Federation of America study. This unfair practice creates a perverse incentive structure that charges safe drivers with poor credit $905 than drivers with a DWI and excellent credit.

Louisiana’s largest insurer, State Farm, charges “people with fair credit a 78% surcharge over the premiums charged to excellent credit drivers, and it charges poor credit customers a 224% surcharge on average.” Couple these astronomical surcharges with the fact that Louisiana ranks 49th in average credit score, and you will see why Louisiana drivers pay more for auto insurance.

Big insurance companies do not want to discuss how they charge safe drivers with poor credit more than dangerous drivers with good credit. They would rather talk about “tort reform,” which strips consumers of their rights and does nothing to lower insurance rates.

Louisiana will not begin to address our insurance crisis until we start listening to the people who are suffering the most and stop listening to these giant insurance corporations that profit from our pain. We need real insurance reforms that protect consumers, hold insurance companies accountable, and ban the use of credit scores in price setting.