An insurance industry critic says a 2020 tort reform measure has given consumers a false hope of auto insurance rate reductions in the wake of a new study predicting rising premium rates this year in Louisiana.
Eric Holl, executive director of the nonprofit Real Reform Louisiana, said the Civil Justice Reform Act, which took effect in January of last year, has yet to produce lower auto insurance rates. A study by the financial research website ValuePenguin said Louisiana auto rates would on average increase this year by 0.82%, which is higher than the national average.
The average cost of auto insurance in the state is now $3,720, which is 92% higher than the U.S. average, ValuePenguin reported. But Louisiana auto insurance rates have declined somewhat in recent years, with last year’s rates declining 1.71%, the study said.
“Legislators voted for tort reform based on the false promise of rapid rate reductions of 10 to 25%,” Holl said in an email to the Louisiana Record. “We've seen no rate reductions, and now Louisianans have fewer rights when their insurance company forces them to go to court.”
Supporters of the tort reform measure, including provisions that aim to reduce medical damages awards, say another year or more is needed before the reforms’ impact on the premiums will be seen. More claims under the new rules will have to work their way through the legal system before a clearer picture of the claims experience emerges, they say.
In addition, tort reform supporters point to how bodily injury claims filed in Louisiana have been much higher per capita than the national average, leading to higher damages awards and, in turn, higher auto insurance rates.
“The supporters of tort reform now say it'll take years before we see an impact on auto rates, but that's not what they said when the legislation was being debated and then signed,” Holl said. “The insurance commissioner, prominent business lobbyists and insurance-friendly legislators all promised us rapid auto insurance rate reductions as a result of tort reform.”
Real Reform Louisiana suggests that the insurance industry needs to rethink how rates are calculated to ensure that they are based on the real risks people pose when they drive. Penalizing good drivers using non-driving criteria such as education, occupation, gender and credit scores tends to unfairly penalize poorer drivers with good driving records, Holl said.