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‘The landscape has changed dramatically’: Donelon calls for lower car insurance rates

April 7, 2020
Originally posted on The Advocate

Auto insurance companies in Louisiana ought to follow the lead of Allstate and Geico in reducing rates, state Insurance Commissioner Jim Donelon said Tuesday.

“The landscape has changed dramatically. The risk has been reduced significantly,” Donelon said, referring to the sharp reduction in driving following the stay-at-home orders issued by Gov. John Bel Edwards that have shuttered commercial activity throughout the state to limit the spread of the coronavirus.

Donelon made his comments shortly before Geico announced that it is “providing a 15% credit to its auto and motorcycle customers as their policy comes up for renewal between April 8 and Oct 7.” The average savings will be $150 per auto policy and $30 per motorcycle policy.

Geico acted a day after Allstate announced it would reduce rates by 15% for premiums due in April and May.

The move will save Allstate policyholders in Louisiana a total of $13 million, Donelon said, noting that he cannot legally force the insurance companies to cut rates.

In all, Allstate's reductions will save drivers nationally $600 million, the company said, while Geico estimated the savings for its drivers nationally at $2.5 billion.

State Farm and Progressive both said in emails Tuesday that they are considering rate cuts.

Louisiana has the second-highest car insurance rates in the country on average, and that has been a hot political topic over the past year.

Real Reform Louisiana, a Baton Rouge-based group, has followed the lead of national consumer groups in calling for insurance companies to pass their savings along to drivers.

“Fewer drivers means fewer accidents, and surging profit margins for insurance companies,” said Eric Holl, executive director of Real Reform, which was created several months ago to oppose efforts by the Louisiana Association of Business and Industry that blame trial attorneys for the high rates.

LABI tried to push a package of measures through the Legislature last year that would have made it harder for injured people to win awards against their insurers. Known as tort reform, the measure by then-state Rep. Kirk Talbot, R-River Ridge, would reduce car insurance rates, LABI claimed, by tilting the scales away from a lawsuit-happy system.

A state Senate committee defeated the move, and two state senators who voted against the LABI-backed bill were defeated for re-election after a vicious business-funded campaign.

Eddie Rispone, the Republican candidate for governor, promised to push tort reform, but Edwards narrowly defeated him.

Edwards has sided with the trial attorneys who oppose tort reform and question the lack of direct evidence that the changes sought by LABI will actually reduce car insurance rates. The attorneys say LABI’s effort is a smokescreen meant to take away the rights of individuals to hold companies to account for their mistakes.

State Sen. Jay Luneau, D-Alexandria, is sponsoring measures supported by Edwards and Real Reform Louisiana that Luneau says would mandate insurance rate reductions for widows, veterans, women and the poor.

LABI President Stephen Waguespack has said pushing the tort measures through the Legislature this year was his organization’s chief priority.

In a text message Tuesday, Waguespack agreed with Donelon that the companies ought to reduce rates temporarily.

“The claims data drives the rate calculations,” Waguespack said. “Since claims are down, rates should go down. Similarly, when the Legislature passes tort reform, the number and scale of frivolous claims will go down, which will also drive rates down.”

Talbot, now a state senator, also said the insurance companies should reduce rates.

“It’s very appropriate in light of what we’re all going through with the coronavirus,” he said.

State Farm, with a 30% share, has the biggest slice of Louisiana’s car insurance market, followed by Progressive with 10%, Geico 7.8% and Allstate 7.3%.

“We know our auto insurance policyholders are driving much less than anticipated,” Gina Morss-Fischer, a State Farm spokeswoman, said in an email. “We are closely monitoring our automobile insurance loss trends and are considering how best to take this into account and return value to our auto insurance policyholders. We expect a decision in this regard by the end of the week.”

Jeff Sibel, a spokesman for Progressive, said in an email that the company is “exploring how to best return some premium to customers to reflect the decreased exposure that comes with less frequent driving during the pandemic and expect to have those plans in place soon.”

He said Progressive has already “committed to not canceling or non-renewing any customers’ coverage for non-payment through May 15th and have expanded coverage for customers temporarily delivering food or medicine.”