(The Center Square) — Louisiana lawmakers heard Thursday about the state’s high auto insurance rates and discussed possible solutions.
Sen. Kirk Talbot, R-Jefferson, said Louisiana ranks number one in cost of auto insurance while Mississippi ranks 29th, Alabama 33rd, Arkansas 27th and Texas 20th.
Louisiana also has the highest jury trial threshold in the country at $10,000.
Despite the recent insurance bills passed in the session that ended June 3, lawmakers, insurance companies and small businesses argued not enough was done to fix the auto insurance crisis.
Rep. Kyle Green, D-Jefferson, pointed out that the recent insurance laws encouraging competition are based on lowering the rate of inflation-driven increases rather lowering the initial price of policies.
Tim Temple, the state insurance commissioner, argued that the initial price is at its current level because of insurance companies pay out more in claims compared than they receive in premiums.
Temple says in Louisiana, the 10-year average loss ratio, which is losses related to claims divided by earned premiums, is 71% for private passenger auto coverage and 84% for commercial auto coverage. The national average is 67% percent for private passenger coverage and 66% for commercial auto coverage.
Eric Berger is the senior vice president for government affairs at The Gray Insurance Group. He said the collateral source doctrine is the primary cause of high rates. The collateral source doctrine allows the victim of an accident to receive recovery payments from both their insurer and the wrongdoer.
Sen. Jay Luneau, D-Pineville, argued against Berger’s claim, stating that since chopping down the collateral source requirements in 2020, the insurance companies have actually continued to lose money.
“Y’all proposed, being the insurance industry, a deduction in the collateral source, and we reduced it by 60% and you lost more money?” Luneau asked.
Berger responded by saying “That’s absolutely correct.”
Berger also stated the severity of the bodily injuries in claims and the total number of accidents are similar to other states. He says the reason insurers in Louisiana pay out more money than other states is simply the number of bodily injury insurance claims.
On average, there are twice as many bodily injury claims per accident in Louisiana than other states.
Karl Mears, owner of Razorback Rentals, a small trucking company, believes there are more claims is due to big settlements. Mears testified to hitting a $600 mirror and not knocking the victim out the lane. He paid $25,000 more in bodily injuries.
“Now that’s fraud,” Mears said. “Claims agent, We’re talking. Her exact words I won’t forget them. ‘This is Louisiana, they’re going to get something.'”
The other trucking company owners agreed and said insurance companies should be able to stand up against these fraudulent claims.
Rep. Josh Carlson, R-Lafayette, echoed that sentiment.
“We have created system in Louisiana that encourages lawsuits,” Carlson said.
