Louisiana drivers will pay the highest prices for auto insurance in the nation next year despite having passed a sweeping tort reform law that was sold as a way to dramatically lower premiums by as much as 25%, an insurance industry executive, who was one of the primary forces behind the legislation, told a panel of primarily Republican businessmen and legislators, who helped pass the new law.
“Frankly, I think we’re going to be number one next year,” said Jeff Albright, head of the Independent Insurance Agents & Brokers of Louisiana. He was addressing the Aug. 6 meeting of Louisiana Economic Recovery Task Force, a group of mostly Republican businessmen and legislators put together by House Speaker Clay Schexnayder, R-Gonzales, and Senate President Page Cortez, R-Lafayette, to advise lawmakers and advocate policies.
Louisiana has had the nation’s second-highest auto insurance rates — the average here is $2,480 annually, according to Business Insider — for several years now.
But lowering auto insurance rates really wasn’t the point of the tort reform legislation signed into law last month, Albright said. After years of trying to pass bills that would limit the ability of individuals seeking recompense from injuries through the courts, tort reformers took a different tack.
“Strategically, we did something different this year in pressing forward on tort reform,” Albright told the panel meeting on a video conference. “Historically, we’ve talked about tort reform from the perspective of ‘we need to improve the business environment, and tort reform is an important part of improving the business environment.’ We all get that.
“But it is not really an issue that is going to excite Joe Six-Pack to call their legislator and press for tort reform. And so, the change in strategy was we kind of tied tort reform to automobile insurance this time.”
Though debate and negotiations had gone on for years, a deal on legislation to limit civil trials in hopes of lowering auto insurance rates di…
Regular people, who don’t know much about the complexities of the court system, were excited. Supporters criticized, often harshly, opponents for trying to block an avenue toward lower auto insurance premiums. The other side countered that prices were higher because of what was included in Louisiana ratemaking, such as age, gender, and marital status.
Albright contended Louisiana’s legal system incentivized litigation.
The number of wrecks Louisiana drivers have is right in line with the rest of the country as are the number of insurance claims to repair vehicles. But the number of claims for injuries in automobile accidents is about twice the national average, he said.
Plus, the state’s civil justice system promoted settling claims for policy limits, which for 45% of Louisiana drivers is the minimum allowed: $15,000 per person, $30,000 aggregate.
Settling every claim promoted the “in a wreck, get a check” expectation among many, Albright said. That was the dynamic that raised insurance prices. But House Bill 57 by Schexnayder does more than alter how bodily injury torts are handled in the courts — it applies to all civil legal actions.
Since the 1970s, the insurance industry and business community has pushed state legislatures nationwide to alter how far courts can go to arbitrate disagreements between individuals and companies. Time-consuming and expensive, litigation chills business activity and expansion, proponents argued.
Ask the former owners of Bankston Drug Store.
As the only drugstore in Fayette, Mississippi, Bankston was sued repeatedly during the 1980s and 1990s in multimillion-dollar lawsuits that were really against big pharmaceutical companies and other national manufacturers. At the time, Mississippi law required a local party to keep a lawsuit before the court in Jefferson County, whose jurors were known to be profligate. Between 1995 and 2000, Mississippi juries returned about 20 verdicts of more than $9 million.
Tort reform in Mississippi has since changed the legal framework that allowed that situation.
Louisiana businesses and insurers have attempted, with a large measure of success, to change the rules and laws that govern how courts operate. They also had failed in many efforts to overcome opposition from lawyers and judges and, sometimes, health care providers.
Starting in 2019, business and insurance interests went all-in with omnibus tort reform bills tied to auto insurance rates.
Though the changes brought about by HB57 won’t be lowering auto insurance premium prices any time soon, the upside of the coronavirus pandemic is that with less driving comes fewer accidents. State Farm, Progressive, Allstate and Southern Farm Bureau are among the 19 companies that have announced rebates and rate reductions linked to the pandemic.
And while Insurance Commissioner Jim Donelon predicted Louisiana’s legislation would lower rates by up to 25%, he is most welcoming to insurers issuing rebates and reducing premiums because of COVID-19 in the meantime.