Tuesday, November 12, 2013

Why Are We Buying What Donelon Is Selling?

Louisiana insurance Commissioner Jim Donelon explained last week on Angela Hill's radio show (at about minute 13:00) why our auto insurance is so high.  Auto insurance rates in Jefferson, Orleans, and a couple of other parishes are 40% higher than rates in the rest of the state because of a prolific "soft tissue" market, Mr. Donelon said.  That is, the proclivity of locals, aided by lawyers and doctors, towards seeking compensation for injuries resulting from auto accidents.  It pains me to agree with that characterization of the local citizenry.

It also leaves alot unexplained, in my opinion.  Seven years ago I paid about $74/mo. for a policy in Nashville with $100,000/$300,000 (100/300) limits and about $80/mo. for the same coverage in Chicago.  When I moved back to New Orleans, I had to slash my coverage limits to 50/100 just to barely afford auto insurance here.  Turns out I couldn't even barely afford it.  I just plain could not afford it, not even if I doubled my deductible.

With each passing year, I tacked on 365 more days to my flawless driving record *knock on wood*.  Still, my premiums continued to rise despite my car and me both being six years older and my having aged into an (allegedly) cheaper rating class; and five years into my move back home, I had to drop my coverage to the 25/50 state minimum.  

Commissioner Donelon's explanation does not even come close to explaining why I and every Louisianian shell out 50% more money for about 1/5th of the coverage that we would get in other major cities.  The WDSU report that ran last evening seems to confirm my hunch that the prevalent "soft tissue" industry is not to blame for much of this disparity in auto insurance rates because it only accounts for approximately 10% of the increased premium.  That news story also makes very fuzzy links between a national rise in auto insurance fraud and cell-phone caused driver distraction, but Louisiana's ridiculously high insurance rates long pre-date either of those phenomena.  

Even if auto insurance fraud accounts for 40% of our premiums in metro N.O., that does not satisfactorily explain why it's 40% more for WAY less coverage.  I am, in fact, now paying 40% more than I paid in Chicago and Nashville, but shouldn't I be paying 40% more for 100/300 coverage instead of 40% more for shitty 25/50 coverage?  Maybe there is an actuarial table somewhere that that backs up Mr. Donelon's explanation, but until I see it, I ain't buying it.