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One thing that the legislature is expected to tackle in its next regular session is reining in soaring auto insurance premiums.
Rep. Gabe Firment (R-Pollack), the chairman of the House Insurance Committee, says two things that are not factors in our large auto insurance premiums are natural disasters and the conditions of our roads.
“That’s a talking point we hear quite often is that it’s our roads here in Louisiana that are causing our insurance rates to be so high,” says Rep. Firment. “That’s not the case.”
Firment says one of the biggest factors in our high premiums is the cost of litigation.
“We file twice as many bodily injury claims as the national average,” Firment points out. “We file many more bodily injury claims (than) in the states in our immediate geographic area. We litigate at a much higher rate than other states.”
Ben Riggs, the executive director of Real Reform Louisiana, says limiting a driver’s right to sue will only benefit the insurance company and ultimately hurt the victim.
Riggs says a bigger factor is auto insurance companies basing their premiums on credit scores, which he says have nothing to do with whether someone is a good driver or not.
“In a state like Louisiana, where collectively we have the second worst credit score in the country, using something like credit scores which can double your insurance rate have had a terrible effect on insurance premiums in Louisiana,” Riggs says.
Another thing Riggs would like to see from the insurance companies is more transparency in how they determine a driver’s premium.
“This is something that’s hidden behind a veil of secrecy by the insurance industry,” says Riggs, “and so we need to better understand it.”
Firment says while the rate of uninsured drivers is not an outlier relative to the national rate, many drivers are underinsured – they do not have enough liability insurance to cover the repairs of vehicles that an at-fault driver damages.
“We have very low minimum limits here in Louisiana,” says Firment. “We know that’s a problem. The cost of vehicles have gone up, and our liability limits are not sufficient.”
Firment says upping the minimum liability requirement is a lot easier said than done, since that by itself would send the already sky-high premiums soaring even higher.
Riggs agrees with Firment that underinsurance is an issue, since vehicles are more technologically advanced and, therefore, much more expensive to repair.
“When I was 20 years old, replacing a side view mirror on a little Pontiac could cost $50 to $75,” says Riggs. “But now that mirror has sensors and cameras and blinkers in it, and so it’s a $500 mirror and therefore just more to replace.”
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