Wrecked: How Auto Insurance Takes Louisiana for a Ride

A data-driven investigative series on the high price of car insurance in Louisiana.

Louisiana’s auto insurance rates rank as one of the most expensive in the nation, right alongside Michigan, a state synonymous with the American car industry. How could the home of Ford, General Motors, and Chrysler have auto insurance rates that, according to some estimates, are currently 64% higher than the national average? Are the factors that drive up costs in the Wolverine State the same as those in the Pelican State? Who is responsible?

The problem is not a new one in Louisiana, and for more than two decades, legislators and policy makers have made occasional efforts at addressing the issue without much success.

For the most part, the public explanations are entirely speculative and, in some cases, clearly misguided. Some argue our rates are a function of the weather. Or maybe it’s because of people who sue after they’re in a car accident. Or perhaps it’s because Louisiana is home to a disproportionate number of bad drivers or the fact the state’s surface transportation infrastructure is objectively insufficient.

During the next few weeks, the Bayou Brief will be publishing a first-of-its-kind series of data-intensive reports, “Wrecked: How Auto Insurance Takes Louisiana for a Ride,” in order to unpack the truth about the state’s high rates and to provide a set of common sense solutions that would be most effective in driving down costs down for everyone. The subject, at least at first glance, may seem somewhat dry, but rest assured, the details are often sensational.

Given the renewed interest in Baton Rouge about the subject (Stephen Waguespack, the president of LABI, an influential conservative interest group, suggested that HB 372, a tort reform bill titled “the Omnibus Premium Reduction Act of 2019,” is the “most important bill” in the current legislative session), it is worth asking whether the proposed solutions are a good faith effort to help consumers or if our high auto insurance rates are being used as a smokescreen. If there are, in fact, a set of tort reforms that protects consumers and reduces costs, that would meet the definition of good public policy, but we should be guided by objective data, not simply a list of demands from industry and its lobbyists.

To that end, the Bayou Brief has hired a nationally-acclaimed auto insurance expert- not a lawyer or a political operative- to take a deep dive into the factors that drive up the price of premiums here in Louisiana. That analysis will guide our reporting, though, as a part of this series, we will also track pending legislation and statements by lawmakers related to auto insurance. Are their conclusions backed up by the facts? Are they advocating for good public policy or just good partisan politics? How does the legislation currently being considered actually meet the goal of reducing the price of auto insurance?

And the survey says…

Drivers in Louisiana, like other states, are only required to maintain liability insurance; comprehensive and collision coverage are optional. Notably, the costs of optional liability coverage are the ones proponents of tort reform point to in support of their proposals. According to a 2016 study by the National Association of Insurance Commissioners (NAIC), the most recently available data, Louisiana actually ranks as the fourth most expensive state in the country for auto insurance. Florida, New Jersey, and New York rank as the first, second, and third most expensive; Michigan is in fifth. While there is no agreed-upon standard to determine state rankings, this data point is particularly useful because it derives from all auto insurance sold, rather than smaller survey samples used in other rankings, and because the liability-only measure more accurately captures the cost of the coverage mandated by state laws.

In recent media coverage and throughout an April 15th meeting of the House Civil Law, references were only made to a survey commissioned by Insure.com, which placed Louisiana as the second most expensive state in the nation, directly under Michigan. That survey looked at the average prices of “full coverage for a single, 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage.“ Their “hypothetical driver” has a “clean record and good credit.” 

In addition to the survey, Insure.com also included supplementary analysis about each state; this analysis is the most frequently cited justification for many of the reforms currently being considered in the legislature. However, in Louisiana’s case, Insure.com relied entirely on commentary from state Commissioner of Insurance Jim Donelon, an elected official responsible for regulating the industry and ensuring a “fair and stable marketplace.”

Donelon directed them to an online news article published by the Franklin Center for Government and Public Integrity’s Watchdog.com, which was essentially a press release about a U.S. Chamber of Commerce report on costs of the “tort system.” According to Governing, a nonpartisan publication covering state and local governments, the Franklin Center is “one of the top recipients of money from groups tied to the conservative billionaire Koch brothers;” the U.S. Chamber of Commerce, of course, is the nation’s most powerful business lobbying group. Small businesses in coastal Louisiana may recall the U.S. Chamber is the same group that opposed claims in the aftermath of BP’s Deepwater Horizon explosion.

Regardless of one’s political beliefs, it should seem readily apparent why it is problematic to rely on an elected official responsible for regulating a state’s auto insurance market to explain the real reason auto insurance in his state ranks among the nation’s costliest. Commissioner Donelon, who is campaigning for a fourth consecutive term, has a vested political interest in refuting any notion that the high costs are the result of failures by his office to enforce regulations and protect consumers. Indeed, in online ads, Donelon’s campaign is also claiming he is responsible for “lowering car insurance rates.”

Ultimately, there is little difference in whether Louisiana is ranked as the country’s second or fourth most expensive state for auto insurance; either way, it’s a problem that demands a solution. However, consumers and residents deserve an honest evaluation, and lawmakers should be guided by objective data, not partisan spin.

On Monday, members of the House Civil Law Committee kicked off the debate on auto insurance reform with a lengthy discussion of the bill championed by LABI’s Waguespack, so that is where we begin as well.

Read the first report here.