Car Insurance Continues to Climb
For some businesses, vehicle insurance ranks among top expenses. Is there anything that can be done?
If it seems like auto insurance rates are going up each year, that’s because they are. Rates increased in 2015, 2016 and 2017, and 2018 doesn’t look any better. Auto insurance companies have reported posting another year with negative profit margins, mostly credited, they say, to an increase in costly car accidents and disastrous storms. The likely result of this scenario will be more rate increases ahead.
“Auto insurance is increasing across the nation,” says Ryan Daul, producer at Daul Insurance Agency. “Auto insurance carrier’s profitability, or lack thereof, is the ultimate reason for rate increases.”
Daul explains that things such as catastrophic weather, an increase in distracted driving — commonly texting while driving — an increase in the cost to repair vehicles, and increases in medical costs and legal expenses all factor into increases. “I think all of these are a factor in Louisiana,” he says, “but I’ve also heard other reasons as contributing factors from industry experts and carriers.”
Daul says issues particularly relevant in Louisiana include poor roads and a high percentage of uninsured drivers. “Louisiana’s accident frequency rate is slightly higher than the national average,” he says. “The property damage claim rate is slightly higher than the national average and the bodily injury rate is double the national average according to the most recent available information.”
According to Insure.com, in 2010, 2012 and 2013 Louisiana held the title for the most expensive state in the country for car insurance. The state then dropped down to fourth place the last couple of years, but is currently back up to second place with an annual premium of $1,921 — 46 percent higher than the national average. The site states that one of the reasons for this ranking is because Louisiana has a higher than average amount of uninsured motorists on the road. Nearly 14 percent of Louisiana drivers are estimated to be driving without insurance. Even those who are insured may frequently only carry a very basic, very minimum policy.
DID YOU KNOW?
Litigation Drives Up Rates
According to Louisiana’s insurance commissioner, Jim Donelon, about 40 percent of drivers carry the minimum car insurance limits required by state law. With a lot of “working poor” in Louisiana, Donelon has noted that those in auto accidents see ads by lawyers saying they will get them money and feel entitled to get a big check for a minor accident. Thus, litigation is another reason that Louisiana car insurance rates are so high.
Donelon has cited as an example of the excessive amount of litigation by highlighting the Louisiana Farm Bureau. This insurer is part of a six-state chain of insurance providers; it carries around 17 percent of the policies from the six states, but handles a whopping 50 percent of the lawsuits resulting from auto accidents. When insurers pay out more in claims, the cost is passed on to motorists in the form of higher premiums.
Rates in Louisiana also continue to rise due to widespread distracted driving and cheap gas.
The Louisiana Highway Safety Commission reported that from 2011 to 2015, 192 people in Louisiana died and almost 27,000 people were injured because of distractions. Cheaper gas results in more drivers out on the road, who now are more distracted than ever, which leads to more accidents. The cycle continues as the claims could then end up in litigation.
As a company that relies on cars and trucks for their business operations, Sheila Burns, vice president of QCS Logistics, a trucking and transportation business, said that vehicle insurance plays a major role in her company’s bottom line.
“Our vehicle insurance cost is high compared to other enterprises because we belong to a high-risk group as defined by insurance underwriters,” she said. “We carry auto insurance for our company-owned vehicles, as well as for several leased vehicles. In addition, we carry liability insurance for our independent drivers.”
Burns says the number of carriers that are willing to insure her company’s industry is limited.
“We utilize a national insurance agency that services what is termed a specialty market,” she says. “While this has allowed us to stay insured, we are often forced to use ‘non-admitted’ companies. This simply means that the majority of insurers are out-of-state companies. Consequently, we are not protected under the state’s insurance fund if the insurer goes bankrupt.”
If you can, it’s important to shop around.
“Look hard at the few markets we have in Louisiana,” Daul said. “The rates are still going to be high, but you can make your business more desirable to carriers by taking the proper steps to avoid claims.”
“These steps could include, but are not limited to, driver training, proper hiring, implementing safety procedures, GPS monitoring, dash cams and proper vehicle maintenance,” he said. “For consumers, shop your insurance and make sure your current agent is shopping or get multiple agents involved.”
Daul acknowledges that a lack of competition means even shopping around may not provide much relief. In this case, it may pay to look at other ideas.
“You may want to check with carriers to see if there are any discounts for adding a camera to your vehicle,” he says. “Some commercial auto carriers will provide a rate reduction for installing dash cams.”
For local limousine company Limousine Livery, president Christy Dirks says that the company focuses heavily on hiring professional chauffeurs with vetted background checks, conducting annual motor vehicle reports and providing their employees with extensive safety training.
“This is extremely important to our clientele as we know who is driving our clients safely,” she says. “Insurance companies consider these factors when providing the rates for the upcoming year, along with prior year losses. Insurance is one of the highest single expenses of a transportation company. We spend a tremendous amount of time each year securing insurance.”
Dirks adds that the fact that Louisiana, and in particular New Orleans, is a highly litigious region also contributes to the problem.
“This has caused many insurance companies to refuse to write in this area,” she said. “In turn, it reduces the supply of insurers and drives the cost higher.”
Even with insurance coverage, transportation companies are completely liable for any company-owned vehicles in their garage.
“While our insurance company will assign legal representation on our behalf, we always engage our corporate attorney to help track progress of any claims against us,” Burns says. “They have been very effective in keeping outside counsel focused and advise us on any settlement options. We are also very safety-conscious and provide regular refresher training for our drivers and have random and mandatory post-accident substance abuse training. As a result, our accident rate is very low.”
Daul says he hopes for movement by Louisiana’s government in regards to litigation.
“As many experts have stated, many auto insurance carriers have left our state due to litigation from trial attorneys,” he says. “If we can elect legislators that are pro-tort reform it might create a different atmosphere and bring more insurers back into our state, which will create a more competitive auto insurance market.”
STILL TO COME
Rates Continue to Climb
The Louisiana Department of Insurance last year approved double-digit rate hikes for at least five insurers that either took effect in late 2017 or will kick in sometime this year. Certain policies under Progressive and Allstate are in that group.