Louisiana’s business voice, LABI, as well as the Louisiana Insurance Department each took a huge hit in the waning days of the recent legislative session. LABI, with the full support of Insurance Commissioner Jim Donelon, pegged legislation to supposedly reduce insurance rates in the state as the most important proposed legislation of the session.
But a funny thing happened on the way to the legislative forum. Under close scrutiny by some fairly knowledgeable legislators, and revealing testimony by insurance consumer representatives, the proposed changes to current statutes fell like a crator. The new law, if passed, was supposed to lower insurance rates. But no assurances that rates would come down were included in the proposal, that was a product of a task force set up by Donelon.
And surprise, surprise. The task force was made up of numerous insurance companies and legislators, many of who have pocketed campaign contributions from the insurance industry. Fat chance that the voice of the average Joe would be heard. The task force concluded that law suit abuse was the cause of the state’s highest insurance rates in the nation. But the task force ignored a recent study by the U.S Chamber of Commerce’s Institute of Legal Reform that showed Louisiana within the national average when it comes to per capita cost of law suits involving auto accidents.
What did come out of the legislative hearings was a devastating portrayal of how the Louisiana Insurance Department allows insurance companies to discriminate against a large number of Louisiana groups. In example after example, Louisiana drivers are penalized base on their income, their race, the type of job they hold and whether or not they are married.
Did you know that there is a “widow penalty” allowed by the Department of Insurance? That’s right. If you have lost your spouse, you are charged as much as 15% more for your car insurance by many companies operating in Louisiana. Most states prohibit discriminating against widows, but not Louisiana. As Douglas Heller, a nationally acclaimed auto insurance expert, told legislators, “The fact that insurance companies charge more to perfectly safe drivers once their husband or wife passes away is both unnecessary and unseemly, and this widow penalty should be prohibited.”
If you are a blue-collar worker or if you do not have a college degree, a number of insurance companies operating in Louisiana charge you significantly more, by as much as 15%. When testifying before the Legislature last month, the insurance commissioner denied the companies could use a driver’s occupation when setting insurance rates.
But he had to be corrected by his own chief actuary and then admitted yes, there was this discrimination. So unfortunately, you pay the insurance penalty if you have the wrong job title or if you don’t go to college.
`And there is absolutely no information or any data that shows this has any bearing at all on a policy holder’s safe driving record.
Louisiana’s insurance department also allows companies to charge higher rates to those drivers who do not have a high credit score.
And even though credit scores have nothing to do with a person being a safe driver, a recent study by WalletHub found that Louisiana drivers pay anywhere from 60% to 135% more if they have poor credit scores. As Heller told legislators; “If you drive safely, you should pay the same price as anyone else who drives safely, regardless of your credit score. Your credit history should not matter.”
The disparities allowed by the insurance department are numerous and staggering. For instance, wealthy drivers with a DWI pay less than drivers with a spotless record but a low credit score.
And in numerous cases, African Americans pay significantly more, as much as 70%, for their car insurance than whites according to he Consumer Federation of America.
Heller make no bones as to who is at fault over all these unfair disparities.
“It’s not just the insurance companies are overcharging Louisianians with low credit scores. It’s that the state Department of Insurance hasn’t done anything to stop companies from these egregious premium hikes.”
In a state plagued by the nations’ highest insurance rates, favoring a certain class of drivers over others will certainly be a major issue in this fall’s election to pick the state’s next insurance commissioner. The incumbent will have a lot of explaining to do. Stay tuned.