Demagogic insurance bill aims to distract

It’s not even old wine in new bottles; it’s old wine in old bottles and still sour. And it’s the same old story of distraction to enable continued transference of wealth from ratepayers and consumers to trial lawyers.

SB 55 by Democrat state Sen. Jay Luneau essentially warms over some corpses from last year, combined into one bill. It would prevent insurers from basing rates on individuals for vehicles on the status of an insured being a widow or widower, the insured's credit score/rating, or the gender (which really means “sex,” but insurers refer to it as “gender”) of an insured over the age of twenty-five.

The facts haven’t changed to make any of these changes any more redeemable or sensible. To start with the banning using of widow or widower status that typically confers higher rates on previously married individuals, that simply reflects that in general single people drive more, which raises rates. Individual cases vary, but insurers often can’t distinguish among individuals and so are permitted to use this grouping.

In regards to rates differentiated by sex, 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 also pushes rates higher for everybody. 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.

Considering prohibition of the use of credit scores in rate determination, the fact is people with worse credit histories have more claims which 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 state of Arkansas study, shows that only a fifth of individuals pay higher rates as result with the remainder unaffected or paying lower rates.

None of these facts gets in the way Luneau’s and his special interest allies’ demagoguery on the issue. For example, they will complain that women as a whole who drive similar cars with similar claims and driving record histories pay more than men for insurance in the state – of course, without holding constant several other factors that go into rate determination that could explain the difference. But setting that aside for the moment, more than half of the states that can use sex in rate determination emulate Louisiana in this respect, as of 2018 (several, which have bought into the drivel, essentially outlawing that use in all or parts of a state, and others have the same rates). Only about half of that total charge women more than similarly situated men.

A particularly dense ally of Luneau’s, a former flak of Democrat Gov. John Bel Edwards named Erich Holl who fronts a largely trial-lawyer backed faux insurance “reform” group, thinks he knows why this has happened. “Their [insurers’] justification is purely that insurance companies can make a little bit more money by charging women a penalty just for being women,” he alleges.

But …

Men pay about $15,000 more for auto insurance over their lifetimes than women do…. But the differences can be even more dramatic, depending on age, location, and other variables.

And …

Women are statistically safer drivers, which means they’re also less likely to file a claim than men. Therefore, they generally pay less for car insurance … [A] single 20-year-old male driver will pay 21 percent more than his female counterpart. The good news for men is this difference begins to drastically level off as male drivers get older.

These contradict the implication that women pay more – and especially because of some animus by insurers – because they are artifacts of the past. The first quote came from 2012, and the second from 2015, when most states charged men more than similarly-situated women and discussion was about strategies men could follow to try to reduce this disadvantage (with no one suggesting this was discriminatory). As late as 2016, almost three times the number of states charged men higher rates than similarly-situated women.

So, by Holl’s convoluted logic, until half a decade ago insurers were misandrists, but now have become misogynists. Did insurance executives and adjusters, and state insurance regulators, females included, all suddenly become male chauvinist pigs (something triggered by Trump, no doubt, since to these nimrods Trump is the source of everything bad in the world)? If Holl doesn’t see what a ridiculous argument he makes here, he’s the only one.

Not that he or Luneau cares, for the purpose here isn’t to follow the facts in policy-making, but to demagogue the issue to distract from genuine insurance reforms, such as on the commercial side. Luneau and other trial lawyers lost big last year with tort reform for individual rates, so anything they can do to sidetrack the reform train, like promoting this bill as a palliative, they will attempt.