Wednesday, July 23, 2008

Jim Brown: Lege's ignore rising insurance rates

LOUISIANA LEGISLATURE IGNORES
RISING INSURANCE RATES

Two years ago, Louisiana legislators were demanding rate relief for thousands of homeowners and drivers who were witnessing skyrocketing insurance rates. Cries were heard from the steps of the state Capitol urging the Governor to support subsidies in order to lower the cost of insurance. Lawmakers were calling for an insurance summit to deal with a growing crisis throughout the state. So where are we now? Louisiana continues to lead the country in high insurance rates. And in this past session of the Legislature, lawmakers passed legislation that will raise the cost of insurance across the board even more.

Not only does Louisiana have the highest insurance rates in a broad range of categories, the average citizen also faces a deeper debt than any state in the country. State Bond Commission records show that Louisiana's per capita debt has jumped dramatically. Where the debt per capita in other states average is $700 for each person, Louisiana's per capita debt is approaching $1400, with a jump of over $100 this past year alone.

Just last week, national credit reporting figures were released showing that Louisiana car owners carry more auto debt than any other state. The average Louisiana car owner has an outstanding auto debt a $14,705, up 3% over last year. Nationwide, the average driver has an outstanding auto debt of $12,833. Simply put, the average Louisiana citizen pays more but has less to spend compared to any other state in America.

Affordable homeowners insurance has continued to be a massive headache for states along the Gulf Coast. But while other states have taken aggressive action by funding reinsurance programs and creating catastrophic funds, Louisiana is simply raising rates on homeowners across the state. The state created boondoggle, Citizens Property Insurance Company, raised its rates again just a few weeks ago by an average of 18%. And while Citizens rates increase, the legislature has failed to build in the necessary checks and balances on this public company that has been called the single biggest financial disaster in Louisiana's history.

Because of mismanagement and improper oversight, Louisiana policyholders have been forced to incur debt of some one billion, four hundred million dollars. Not because of Katrina. But because of the failure of both insurance officials and the legislature to ensure that once created, the company was run properly. And despite the scandal of how Citizens has been allowed to operate, the legislature in this past session punted taking no definitive action to bring about substantive oversight.

The legislature did make one major change in the law that will affect homeowners’ rates all over Louisiana. The allowable deductible on your home is being raised from 2% to 5%. So for a property owner who has a home worth $300,000, the deductible under the old law would have been $6,000. Under the new law, homeowners are stuck by having to pay the first $15,000 out of pocket. So instead of taking any remedial action to lower the cost of what a homeowner pays, the legislature’s action will cause the average cost of insuring your property to take a significant leap.

In the area of car insurance, the news is just as bad. For years, Louisiana has always hovered in the list of the top 10 or 15 states in the country when it comes to the basic cost of auto insurance. But it hovers no more. The Bayou state is at the top of the heap. Numero Uno. Number one in the country. For the first six months of 2008, the average car owner in states throughout the country paid an average of $1893 per year to ensure their vehicle. Louisiana led the nation as being the most expensive state to drive a car, with an average premium of $2600.

So what did the Louisiana legislature do about this growing problem? They more than doubled the mandatory required amount to drive on Louisiana highways, which will raise the rates of the average car owner by anywhere from 20 to 30%. Governor Bobby Jindal would not touch this proposal with a 10 foot pole, and let the huge auto insurance increase become law without his signature.

A number of states are aggressively addressing auto insurance costs with some creative approaches. Our neighbors in Texas have joined a number of other states in allowing insurance to be sold based on the amount one drives. The car owner receives a monthly bill just like they do for the use of utilities. The more you drive the more you pay. Some states have seen the average insurance rate drop by as much a 30% when mileage is a factor in what insurance costs. Driving less means savings in both what a driver pays for insurance as well as gasoline. There are a number of other ideas being considered by states across the country. Unfortunately, all Louisiana did was to significantly raise the price the average driver has to pay to be on the highways.

Insurance rates to cover health costs will also rise in Louisiana. The legislature added additional mandates that are required to be included in any health insurance policy. And although such mandates or laudable, the bottom line is that when additional mandates are added, the cost goes up. Governor Bobby Jindal ran on a platform of revamping health care delivery Louisiana. Get a better bang for the buck. So far, this critical issue has not been addressed by the legislature.

This column has written before about the leadership role taken in Florida when it comes to reducing the cost of property insurance. Florida Governor Charlie Crist (who is in the running along with Jindal as a possible running mate on the McCain presidential ticket) was lauded recently by The Wall Street Journal for his innovative reforms in dealing with the high cost of health insurance. Florida is moving towards getting the government out of the healthcare marketplace. Insurance companies are now authorized to sell stripped - down, no - frills policies exempted from the more than 50 mandates that Florida otherwise imposes. Florida citizens can get a health insurance policy for as little as $150 a month.

The bottom line in all these proposals is that Louisiana's does not give its citizens the consumer choices that are available in a number of other states. Laws have been put into place setting specific standards that must be adhered to. The system is much too rigid.

Few suggestions are coming from the insurance department. If the Governor and the legislature do not accept the challenge of allowing its citizens more flexibility and more consumer choices, than Louisiana will continue to be the most expensive state in America to buy insurance. Economic development and creating new jobs? The state will be wasting its efforts until the insurance crisis is addressed.

**********

"Am I the only guy in this country who's fed up with what's happening? Where the hell is our outrage? We should be screaming bloody murder. We've got a gang of clueless bozos steering our ship of state right over a cliff, and we can't even clean up after a hurricane. But instead of getting mad, everyone sits around and nods their heads when the politicians say, 'Stay the course.' Stay the course? You've got to be kidding. This is America not the damned Titanic."
Lee Iacocca

Peace and Justice.

Jim Brown

Jim Brown’s column appears weekly, and is published in a number of newspapers and on websites throughout Louisiana. You can read past columns by going to Jim’s website at www.jimbrownla.com. Jim’s regular radio show on WRNO, 995fm out of New Orleans can be heard each Sunday from 11:00 am till 1:00 pm. It is streamed live, world-wide at WRNO.com.

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