This week, the Senate Insurance Committee torpedoed a trio of faux tort reform bills backed by the governor, who practiced as a trial lawyer prior to election to the state’s highest office. In his campaigns , he has enjoyed massive direct and indirect support of personal injury lawyers, who use the nation’s most consumer-unfriendly laws to transfer wealth from ratepayers to themselves by foisting the second-highest average vehicle insurance rates onto drivers to fund the more and larger awards the current set of laws allows.
Louisiana Republicans have for years attempted to ameliorate this situation, and with a nearly veto-proof majority in the Legislature they have a real prospect of carrying it off this regular session. To play defense, Edwards adopted a set of bills forwarded by Democrat state Sen. Jay Luneau, a trial lawyer, as a counterweight, to posture as tort reform in competition with a slew of GOP-backed bills that address genuinely the issue.
The punch line was that Luneau’s bills likely would have increased rates. With SB 13, which would have prohibited differentiated rates by sex for those under 26, research demonstrates that this kind of law not only causes women generally to pay higher rates (all other factors equal) than they would otherwise, but direct and indirect reasons also push rates higher for everybody (which Republican Commissioner of Insurance Jim Donelon understated, when he said the bill wouldn’t change rates).
Women pay more because insurers will blend rates – to get to a single rate, firms lower men’s artificially (all other factors equal, men tend to drive more and more recklessly) and artificially raise women’s – even though the bill’s advocates stupidly assume women for some reason pay more specifically because of their sex, so to ban that consideration would lower rates. And if government intrudes too heavily in the pricing decision by prohibiting blended rates, insurers begin to leave which has the effect of reducing competition and raising prices.
Proceeding with blended rates, this means the higher-risk sex (now paying less) will step up consumption and the lower-risk sex (now paying more) will purchase less, raising the overall risk profile and thus prices across the board. Less directly, this tends to restrict product lines, in part because some insurers will leave the market, with the consequence of reduced downward price pressure.
The same goes with SB 14, which would prohibit the use of credit scores in rate determination. The fact is, people with worse credit histories have more claims and is an extremely accurate predictor. Take that away, and shifting among other factors that would create the same price-hiking dynamic as with taking away sex. In fact, use of credit ratings, according to a recent state of Arkansas study (about which Luneau made a fool of himself in front of the panel by implying private industry had sponsored it, after at first not even knowing of its existence), shows that only a fifth of individuals pay higher rates as result, with the remainder unaffected or paying lower rates.
And, concerning SB 15 which would ban using widow or widower status conferring higher rates on previously married individuals, that simply reflects that in general single people drive more the same vehicle. However, Luneau tried to demagogue the issue by saying insurers raise rates simply because spouses die.
Throughout, Luneau kept denying the laws of economics by calling his set of bills as regulatory devices to drive down costs – even as one witness testified Louisiana’s margins for insurers already were practically nonexistent. He also delighted in bringing up outlier cases to try to show the reasonableness of his measures, treating general conditions as if these didn’t exist. As another witness noted, insurers simply can’t divine every single individual’s risk, so generalities are the accepted practice that permits the pooling necessary for the concept of insurance even to exist.
Luneau’s demagoguery failed to impress the committee (again; he has brought these bills before), but he did notch a small victory potentially threatening real tort reform. Freshman GOP Sen. Louie Bernard voted against measures to defer two the bills. If Bernard isn’t aboard the reform train, that leaves Republicans if all others favor it with exactly the two-thirds vote needed chamber-wide to overcome a certain Edwards veto attempt.
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