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Industry: Bill May Increase Car Rates *** Insurance Changes on Blanco's Desk

Jul 15, 2007


One of the 20 bills still awaiting a decision by Gov. Kathleen Blanco would increase automobile insurance prices $200 to $400 per year for drivers of about 1 million vehicles in this state.

For the remaining 1.5 million vehicles, the cost of supplemental policies, such as uninsured motorists' coverage, also would go up, as more and more Louisiana drivers hit the roads without the required minimum insurance.

At least that's what officials in the insurance industry predict. State regulatory officials question that claim.

"We're looking at a comparison of the law in the other Southern states and what the impact will be on Louisiana consumers," said Kimberly Lewis Robinson, Blanco's special counsel overseeing insurance legislation.

Blanco has until Wednesday to sign Senate Bill 223 into law, veto it or let it become law without her signature.

SB223 would increase on Jan. 1, 2008, the minimum coverage on automobile liability insurance, which is required to legally drive in this state.

Insurance Commissioner Jim Donelon said in a Friday interview, "It's never a good time to increase the cost of insurance by 20 to 25 percent on the poorest of our drivers, the 40 percent who buy the minimum."

Nevertheless, Donelon recommends Blanco sign SB223, saying that so many companies are selling auto insurance right now, the prices have not gone up in a while.

As a legislator six years ago, Donelon unsuccessfully pushed a similar bill.

Donelon also said the amounts insurance pays for wrecks in Louisiana are the lowest in the nation and lag what neighboring states require.

Popularly known as 10-20-10, the policy pays for damage from wrecks the driver causes. For a minimum coverage policy, the insurance company pays for up to $10,000 in property damage, $20,000 total for everyone injured in an accident but no more than $10,000 per person for injuries.

SB223 would require drivers to buy at least 25-50-25 or $25,000 for property damage, $50,000 for total injuries or death and $25,000 for an individual's injuries or death.

The state Office of Motor Vehicles records show that of the 3.7 million registered vehicles in the state about 2.5 million have insurance. About 1 million of those have the minimum liability coverage, Donelon said.

While SB223 would significantly increase the costs for those with minimum polices, Donelon said, drivers buying more than the necessary insurance could see a decrease in their policy prices.

If insurance pays more of a wreck's damages, then other coverage, such as uninsured/underinsured motorist policies, is less likely to be tapped, and that would lead to lower prices, Donelon said.

That's a position the insurance industry disputes.

"The cost of a policy could increase $200 to $400 a year for those drivers with minimum coverage," said Robert Passmore of the Property Casualty Insurers Association of America, a trade group. PCIAA of Des Plaines, Ill., represents more than 1,000 insurance companies.

Passmore, who is director of the PCIAA's personal lines section, says his statistics show that about four drivers in every 10 on Louisiana highways have minimum coverage.

The fifth has no insurance at all.

Even without increasing the prices, the number of Louisiana motorists illegally driving without insurance is going up, Passmore said.

PCIAA found that between 1999 and 2004 the percentage of Louisiana motorists driving without insurance rose from 7.4 percent to 10.2 percent, he said.

"It's easy to draw the conclusion that those numbers could increase, perhaps dramatically, if this bill is signed," Passmore said in an interview Friday.

A spokesman for State Farm Mutual Automobile Insurance Co. said the new higher minimums will translate to a 22 percent increase in prices for about 340,000 customers. Unable to afford the higher prices, many of those customers may choose to drive without insurance, said State Farm spokesman Gary Stephenson of Little Rock, Ark.

That, in turn, increases the risk of being in an accident with an uninsured driver, which means prices will increase for those who choose to buy the additional uninsured motorists coverage, he said. Called UM/UIM, the coverage pays for damage and injuries when the other driver does not have enough insurance.

"It's going to do nothing more than raise the rates on our customers," Stephenson said in a Friday phone interview.

Richard C. Broussard of Lafayette, a member of the Louisiana Trial Lawyers Association, said nearly every other new client he sees was left holding the bag because the other driver caused a wreck and carried minimum liability insurance.

Increasing the minimum amount would better cover the costs of medical care and repairing vehicle damage, he said.

(c) 2007 Advocate; Baton Rouge, La.. Provided by ProQuest Information and Learning. All rights Reserved.

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