Can you put lipstick on a pig? Well, business leaders are certainly giving it their best shot in an effort to counteract the fact that Louisiana’s outrageously expensive insurance rates make the Bayou State an environment hostile to the attraction of new businesses. But, last week, compounding the problem, new figures showed automobile rates continue to rise, along with insurance rates for every homeowner. And unfortunately, both legislators and insurance regulators are assuming a blasé attitude -- “that’s just the price you have to pay for living in Louisiana.”
Newspaper headlines blared out across the country about the skyrocketing insurance costs of driving an automobile in Louisiana. USA Today: “Louisiana Car Insurance Costs Most – the state can’t catch a break.” The San Francisco Chronicle: “Louisiana Tops State Rankings of Car Insurance Rates.” National Auto Week: “Drivers in Louisiana are hit hardest on Car Insurance Premiums.” New York Daily News: “Louisiana has the nation’s most expensive car insurance.” Similar headlines appeared in newspapers coast to coast.
Just how bad are the Louisiana rates? Compared to surrounding states they’re stunning. At an average rate of $2699, the Bayou State far outpaces its neighbors to win the dubious distinction of having the highest car insurance rates in the nation. Texas weighs in at $1,545, making it over $1000 cheaper to insure in Texas than in Louisiana. To the east, Mississippi, a state that fares worse than Louisiana on most lists, car insurance averages a paltry $1,345. Should it really cost $1,354 more for car insurance in Louisiana than in Mississippi? To the north, Arkansas comes in at $1,545, which is $1,154 less than insuring in Louisiana. In every other state in America, the cost of insuring a vehicle is not just less, but a lot less.
Thousands of Louisianans have a camp or beach property in Texas, Mississippi, Alabama or Florida, where legal residence is claimed, in order to obtain a much cheaper rate. Take note of some of your fellow employees or neighbors who drive around your city with out of state license plates. Even at the state capitol, some of the top assistants to statewide officials drive cars registered in other states.
Why are Louisiana rates so high and so out of line with the rest of the nation? Lawsuit abuse -- “It’s those damn lawyers,” shout the insurance companies. But a check of the laws shows that both Mississippi and Texas allow for punitive damages that dramatically increase jury verdicts, where Louisiana does not allow such damages. Doctors in Louisiana only have to buy the first $100,000 of malpractice coverage, with a state fund picking up the excess. The problems go way beyond “those damn lawyers.”
Louisiana brags about its wonderful differences and the special charm of living in the deepest of the deep southern states, and rightfully so, when it comes to the culture, music, food, architecture, plantation homes, football and ambience. But the lousy roads, drunk driving, uninsured drivers, and poorly trained drivers are part of Louisiana’s differences as well, and they aren’t so wonderful.
Then there is regulation, or the lack thereof in Louisiana. In most states, there is a pre approval system that requires insurance companies to submit a rate increase request to the Department of Insurance. Yes, there is a submissions process in Louisiana. But, in Louisiana, the insurance company can go right ahead and raise their rates before regulator review. This makes as much sense as closing the gate after the horse is already out of the barn.
Last week brought a double whammy to Louisianans who buy insurance. On top of the rampant auto rates, Louisiana homeowners really took it on the chin. The state run Citizens Property Insurance Company has voted to borrow $100 million to pay for its own negligence. The company has failed time and time again to follow the law, and from its inception it has refused to institute even the most fundamental financial standards that even the poorest run company would put into place as a matter of course. There is little doubt that any neutral observer would conclude what a headline in the local press summed up well: Citizens Property Insurance Company is the most dysfunctional and incompetent agency in all of Louisiana state government.
This state run fiasco has received blistering criticism from Louisiana state treasurer, John Kennedy. After Citizens voted to borrow the $100 million last week, Kennedy didn’t hold back any punches. "This company is insolvent and yet again it has decided to reach into the pocket of taxpayers," Kennedy said Thursday. "It's time for the legislature to revisit this concept. Let's talk about whether there's a better way."
Kennedy is right that it’s far past time to abolish this inept and feckless state created atrocity that was doomed to failure from the beginning. When you borrow money, there comes a time to pay the piper. Tragically, every Louisiana property owner will have to cough up additional assessments on their property to pay for the borrowing. And has there been any legitimate necessity to borrow in the first place? There have been no major insurance claims in the state. No hurricanes, flooding or hail storms of any consequence. Not one private insurance company has had to undertake deficit financing. If they did, any responsible insurance department would have shut them down. Citizens Property Insurance Company will stick it to Louisiana homeowners for one reason -- to support its own continuing incompetence.
If you add up the much higher charges incurred by Louisiana insurance purchasers as compared to surrounding states, the local folks are stuck paying out well over $1.5 billion a year more. That’s $1.5 billion that has been taken away from the local economy. It’s $1.5 billion that Louisiana families could be using to educate their kids, and improve their quality of life. It’s an injustice to Louisiana taxpayers that elected officials seem unwilling to address. And all Louisiana families are the losers.