Bayou Brief: In Louisiana, Auto Insurers Have a License to Discriminate

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During the past two weeks, through our investigative series “Wrecked: How Auto Insurance Takes Louisiana for a Ride,” the Bayou Brief has revealed how Louisiana motorists with perfect driving records often pay significantly higher premiums for basic auto insurance because of things that have nothing to do with how safe they are when they get behind the wheel.

A 60-year-old driver will find that some of the state’s largest insurers will raise her annual premium by as much as $172 after her spouse passes away. Another driver, who has never been ticketed or caused an accident, could face a nearly $1,600 premium penalty if he has a low credit score, and that’s just to buy the basic coverage required by state law. These are just a few of the ways that insurance companies have moved away from pricing customers based on how they drive and, instead, charging premiums tied to algorithms that place a lot of weight on personal and economic characteristics.

Put simply, in Louisiana, auto insurers have a license to discriminate.

On Wednesday, members of the state Senate Insurance Committee will conduct a second round of hearings on SB 89. Authored by state Sen. Jay Luneau, SB 89 is the first and only proposal in state history that would prohibit auto insurers from discriminating against widows and widowers or on the basis of gender or credit score.

For decades, the industry’s practices have either largely been ignored or simply accepted as standard. But there is nothing standard or acceptable about the kind of institutionalized and pernicious discrimination currently allowed in Louisiana.

Women may be charged more than men, and in a state where women are paid 68 cents for every dollar paid to men, the impact can be significant.

While a person’s credit score does not always directly correspond with their income, it usually does, and in a state that struggles with poverty, that means poor and lower-middle class drivers are disproportionately burdened.

Four years ago, a study by the Consumer Federation of America revealed that African American drivers pay 70% more than white drivers for car insurance, and it should come as no surprise that a state in which nearly one-third of the population is African American is also one of the most expensive places in the country for basic auto liability coverage.

Handing the premium setting of auto insurance over to these non-driving related algorithms is, obviously, unfair to the millions of Louisiana drivers who don’t have the right marital status or credit score. Just as importantly, it also harms public safety and contributes to high auto insurance rates.

When done properly, insurance pricing should send a signal to customers about how to lower their risk and, in turn, lower their premium. If you drive safely, you get a low price. If you drive a safe car, you get a low price. If you are wild on the road and your vehicle has a history of dangerous rollovers, you pay more. The premium drivers are charged will reinforce safety and incentivize higher risk drivers to change their behavior.

But what signals do consumers get nowadays when they open up their insurance bill?

“Fix your credit.” “Don’t let your husband die.” Or, at least, “Remarry soon after the funeral.”

If you can’t address those personal issues, you can’t lower your premium. But if you stay married and maintain an excellent credit score, you can be convicted of drunk driving and still pay a comparatively lower rate.

Insurance companies claim that these new pricing systems are the result of complex, data-driven research. But, really, the industry is just being lazy and greedy.

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Insurance Industry: "Credit Scores" Among Reasons for Louisiana's Rising Insurance Costs.

By Ben Riggs • 16 Feb, 2024

Insurance Industry: "Credit Scores" Among Reasons for Louisiana's Rising Insurance Costs. A new report shows that auto insurance rates are skyrocketing, rising by 26% across the U.S. On average, Louisiana drivers pay $2,909 annually, roughly 6.53% of their income for auto insurance. Wayne Watley at Watley Insurance Group lists “credit scores” among the reasons for Louisiana’s rising auto insurance costs, including poor roads and uninsured motorists. Mr. Watley goes on to say, “It’s a challenge because we’re not one of the richest states, but we have some of the highest premiums.” He is correct—and the data backs him up. Insurance companies use credit scores to determine insurance rates for policyholders. Louisiana ranks 48th in median household income and 49th in average credit score . According to a recent study , safe drivers in Louisiana with poor credit pay 111% more than safe drivers with excellent credit ($1,505 / $713). Consequently, Louisiana has the second-highest auto insurance rates in the nation, which leads to more uninsured motorists, another primary cause of higher insurance rates. The use of credit scores in rate setting also creates perverse incentive structures that make Louisiana roads less safe. In Louisiana, safe drivers with poor credit pay an average of $905 more than drivers with a DWI and excellent credit ($3,548 / $2,643). Meanwhile, traffic fatalities increased by 21% from 2019 to 2022 in Louisiana, and the fatality rate per 100 million vehicle miles traveled increased by 18%, according to KPLC . Louisiana desperately needs real insurance reforms that lower costs, protect consumers, hold insurers accountable, and make our roads safer.