Wrecked: A “Premium Reduction” Bill That Would Only Reduce Car Insurance Accountability, Protections for Injured

For two and a half hours, the state House Civil Law Committee debated a proposal to reduce auto insurance premiums that everyone acknowledged wasn't backed up by the data.

On Monday, the state House Civil Law committee recommended a bill that, if signed into law, would significantly weaken accountability for auto insurance companies, according to industry watchdogs and consumer protection experts. HB 372, dubbed the “Omnibus Premium Reduction Act of 2019” by its authors Rep. Kirk Talbot and State Insurance Commissioner James Donelon, however, does not require any premium reductions whatsoever. 

“I see nothing in the bill related to insurance companies or things they need to do,” Rep. Sam Jenkins told the committee, which debated the bill in front of a packed room for nearly two and a half hours before ultimately approving it along party lines.

Rep. Talbot admitted that state actuaries analyzing the potential impact of the bill’s restrictions on consumers’ rights said only that it is “indeterminable” what impact, if any, the changes would have on rates. Despite that acknowledgement, Rep. Talbot haltingly assured that he knew “rates will go down.”

A statue of Ignatius J. Reilly

“I really don’t have the time to discuss the errors of your value judgments.” – Ignatius J. Reilly

Kirk Talbot is a co-owner of Lucky Dogs, the iconic New Orleans hot dog street vendor that gained “immortality” with the publication of John Kennedy Toole’s A Confederacy of Dunces. Ignatius J. Reilly, the book’s legendary protagonist, worked for a fictionalized version of Talbot’s company.

Rep. Talbot may share Ignatius J. Reilly’s confidence in his own opinions, but during the committee hearing, he did not attempt to reconcile his assertion that auto insurance rates will decrease with the unwillingness of state actuaries to assure savings he had mentioned only a few moments prior.

Following his introductory testimony, the committee heard from Commissioner Donelon and Rich Piazza, who serves as the state’s longtime Chief Actuary and who had been introduced as an “information-only” witness. Piazza, who spent the first eleven years of his career working as an Assistant Actuary at Allstate Insurance, similarly acknowledged there is no existing actuarial data to demonstrate the reforms proposed by Rep. Talbot would reduce consumer costs.

Piazza was also asked about a number of factors Louisiana allows the auto insurance industry to use in determining rates, to which we will return in a subsequent report.

What‘s the evidence that tort reform is necessary to reduce auto insurance in Louisiana?

In short, there is none.

However, as we mentioned in our prefatory report, supplementary analysis provided to Insure.com by Commissioner Donelon references an article titled “Louisiana’s annual tort system costs pegged at more than $4,000 per household” published in a Koch-funded publication, the Louisiana Watchdog. The “tort system” is more commonly known as the American civil justice system.

Lauren Chauvin, LABI.

Lauren Chauvin, a 33 year old lawyer who works as a lobbyist for the Louisiana Association of Business and Industry, spoke with the online outlet about the findings of the tort system study, a product of the U.S. Chamber of Commerce’s Institute for Legal Reform. “It has to do with laws that are unfavorable toward business and also the culture in the courtroom, so it’s a two-fold problem,”  she said. The Chamber’s study, which critics contend is based on a false premise, is largely an exercise in unscientific guesswork. For example, with respect to auto insurance, the Chamber estimates the total costs associated with litigation based on the amount of money the industry collects in premiums, which is pure speculation untethered to any objective findings of fact.

Because auto insurance is so expensive in Louisiana, the Chamber just assumes that litigation against insurance companies is also expensive. However, ironically, if one scratches beneath the surface, they will discover the Chamber’s analysis actually placed Louisiana’s auto insurance “tort system” well within the national average; the state ranks in seventeenth place, and, notably, the report suggests other states pay exponentially more for their “tort system.”

In other words, Commissioner Donelon referenced a report that placed Louisiana as the seventeenth costliest for auto insurance tort claims in order to explain to Insure.com the real reason their survey ranked Louisiana as the second-most expensive state for auto insurance coverage. Something doesn’t add up.

“Louisiana has an unhealthy auto insurance market right now, especially in commercial auto insurance,” Chauvin told the Louisiana Watchdog. “It’s a crisis that we’re dealing with.”

“The problem is the medical expenses from those accidents are through the roof,” she said, though there is no data to support her claim. Then, in the next breath, Chauvin argues for the need for a series of tort reforms, beginning with reducing the jury threshold- that is, the amount of money a plaintiff seeks in damages required to avail themselves to a jury trial, the centerpiece of Rep. Talbot’s bill.

The Donelon Feedback Loop

Proponents of Rep. Talbot’s legislation claim that experts agree the reforms are necessary, but the problem, of course, is that they’re actually quoting themselves and hoping no one calls their bluff.

Though called an “omnibus” bill, HB 372 focuses most of its legislative force on weakening the rights and protections of people injured in car accidents and making other changes related to the post-accident legal system.

The bill, for example, would alter the way injured people’s medical costs are calculated to lower those payments and take away consumers’ rights to sue an at-fault drivers’ insurance company. It does not, on the other hand, limit the rates or pricing practices of auto insurance companies in any way.

Indeed, although the legislation markets itself as an effort to reduce costs for consumers, it is designed, instead, only to protect the industry’s profits and strengthen its ability to avoid paying otherwise legitimate claims.

Louisiana Commissioner of Insurance Jim Donelon. Source: Talk Louisiana

In a throwaway provision that Rep. Talbot said he didn’t think was even necessary, the legislation requires insurance companies to submit a rate filing once a year for three years and lower rates if actuarially justified, which, according to experts, will be easy for insurers to ignore given the lackadaisical oversight at the Louisiana Department of Insurance. 

Among other things, a serious “premium reduction” proposal would provide stronger rules to prevent excessive rates charged by auto insurers and restrict insurers from delaying claim payments, a practice used to net more investment income on premiums. There’s nothing addressing the price-hiking practice of  charging some drivers with unblemished driving records thousands of dollars more because they don’t have great credit.

Rep. Talbot’s and Commissioner Donelon’s plan aims to enhance insurance companies’ courtroom position against injured motorists but pays no attention to questions and concerns about insurance company practices. There is no assurance that insurance companies will be held accountable to rules of pricing fairness or claims paying fairness, and there’s certainly nothing requiring that rates will be lowered if this bill is enacted.

This bill only proposes to make injured drivers, passengers, pedestrians and other Louisianans shoulder the entire burden of high rates charged by insurance companies. It should come as no surprise, then, that the insurance industry supports this bill. 

HB 372 has only made it one step of the way in the legislative process, so there is still time for lawmakers to turn this around and focus the spotlight where it belongs: on the insurance companies that are charging us obscene auto insurance premiums.