Car accidents drive Louisiana's insurance up

New Orleans CityBusiness, Sep 6, 2004 by Richard A. Webster

With pothole-riddled streets, jam-packed interstates, and a litigious population, drivers in Louisiana, a state the 2000 U.S. Census ranked as the poorest in the nation, pay some of the highest auto insurance premiums.

According to the Insurance Information Institute, a public information agency based in New York, Louisiana has the ninth- highest insurance rate in the country at $838 per year. Among U.S. cities, New Orleans ranks sixth with an average annual automobile insurance rate of $2,539, according to Runzheimer International, a consulting firm based in Rochester, Wis.

Robert Wooley, commissioner of the Louisiana Department of Insurance, said unless the state gets serious about addressing the roots of the problem, the situation will continue to deteriorate and the people of Louisiana will be forced to make hard decisions about their ability to own a car.

Until we make the commitment to get unsafe drivers off the highway we'll never lower the insurance rate, Wooley said.

In New Orleans it is not uncommon for people to be quoted up to $200 a month to insure their vehicles. For people making $15,000 a year, a $200 monthly policy would account for 16 percent of their annual income. Throw rent on top of that and eating on a daily basis may no longer be an option, said Steve Fussell, Housing counselor with the Association of Community Organizations for Reform Now.

Automobile insurance has gotten so bad it's eating into the food section of the budget. People are doing what they can to stay legal but it's getting more and more difficult, he said.

The high cost of automobile insurance in Louisiana is due to overcrowded highways, an overly litigious populace, a lack of competition among insurers and a national reputation for fraudulent claims, said Jeff Albright, chief executive of the Baton Rouge-based Independent Insurance Agents and Brokers of Louisiana Inc.

But the No. 1 reason is the high accident rate, Wooley said.

Every year we're in the top 10 in the nation for the number of accidents and either first or second for alcohol-related fatalities. We're paying an awful price in terms of both human lives and cost of insurance.

Wooley attempted to address the problem during the last legislative session by introducing a bill that would establish a system in which drivers would be assessed points for each moving violation. Once drivers accumulated a certain number of points, their licenses would be revoked.

The Legislature rejected the proposal, labeling it too Big Brother, Wooley said.

Previous attempts to reform the automotive insurance system have also failed. In 1996, attempts to institute a no fault system were roundly rejected.

The no fault system states that in the event of an accident each driver is responsible for their own damages and injuries unless those damages surpass a monetary threshold. There can also be exceptions in the event of severe physical injuries.

It was such a divisive and difficult political issue that after that effort, everybody walked away and said 'We're done,' Albright said. I don't see any real stomach for another attempt at that kind of major overhaul.

Bob Hunter, director of insurance for the Consumer Federation of America, an advocacy group based in Washington, D.C., said the group attempted to institute a pay at the pump system in California, which was also beaten back.

The pay at the pump system would have added 7 cents to the cost of a gallon of gasoline. In return, the money would be used to insure every motorist in the state.

We knew the lawyers and insurance agents would be against it and we were ready for them, but we didn't anticipate the oil companies coming in with a multimillion-dollar war chest to fight it, Hunter said.

Wooley said his department will continue to fight for the passage of the points system and will talk to Gov. Kathleen Babineaux Blanco about improving the overcrowded highway system. Now he is concentrating on increasing the number of companies writing automobile insurance in Louisiana.

In July 2003, the Legislature reformed the regulatory system governing insurance to make it more attractive for companies to do business in Louisiana. It resulted in an increase of 20 insurers from 30 to 50. Wooley said he would like to see the number rise above 100.

Until we fix this problem, we're always going to have that group of people who do not have insurance, not because they are disrespectful of the law but because they simply can not afford it, he said.

Driving an uninsured car may be illegal but for many poor people it has become a fact of life, Hunter said.

Insurance companies like to call these people scofflaws but I don't, he said. If I was making $12,000 a year and you're asking me to pay $3,000 for car insurance, I wouldn't pay for it either.