The rest of the story

Paul Harvey, an American radio broadcaster for ABC from 1951 to 2008, did a segment called “The Rest of the Story.” He was well known for this segment, which consisted of stories presented as obscure or forgotten facts on a variety of subjects with some key element of the story held back until the end. 

The broadcast would always conclude with a variation of the tag line “And now you know … the rest of the story.”

Since fall 2024, the Louisiana Legislature has been having monthly hearings on the auto insurance cost “crisis” in our state.  The testimony includes everything from truckers talking about how difficult it is for them to get insurance to defense lawyers talking about the difference between self-pay for medical bills and bills paid by insurance or Medicare/Medicaid. But until February of this year, no one had testified about the insurance industry itself in Louisiana.  

In the last hearing of the legislature’s Judiciary A Committee, Jay Angoff, the former director of the Missouri Department of Insurance and former deputy commissioner of the New Jersey Department of Insurance, presented to the committee. Angoff’s 74-page presentation was titled “All-Lines, Personal Lines, and Commercial Auto Insurance Performance: Louisiana v. Bordering States and Countrywide and Suggestions for Bringing Rates Down.” The considered data was provided by the National Association of Insurance Commissioners.

These are some of the key takeaways from the testimony and report.

Insurance rates are supposed to be based on risk. Actuaries put forth the company’s case that the rate charged is in line with the risk.

The Department of Insurance actuaries check those numbers. 

The year 2023 was property/casualty’s most profitable year ever, with $87.6 billion net income. That’s a 120% increase from 2022. The industry’s surplus — the amount of funds it holds in addition to the amount it has set aside to pay projected claims and expenses — has exceeded $1 trillion in each of the last 3 years.

The loss ratio is the ratio of paid and projected claims payouts to earned premiums. For example, a 70% loss ratio means 70 cents of each premium dollar goes to claims payments, leaving 30 cents plus investment income for overhead and profit. The lower the number, the better for the insurer.  

In Louisiana, the property and casualty 2023 loss ratio was 57.1%, meaning only 57% of premium dollars were used to pay claims and projected claims. The remaining amounts were available to insurers as overhead and profit.

Insurers in Louisiana are more profitable by good margins over our neighboring states and the nation as a whole. Because of hurricanes, these numbers can vary greatly. We were the eighth most profitable state for insurers in 2023. Arkansas was 47th with a loss ratio of 85.3%, Mississippi was 38th with 71.3%, and Texas was 35th with 68.9%. 

The national loss ratio was 65.5%.  

In Louisiana, the private passenger auto loss ratio was 9.14 points lower than the countrywide average, making us substantially more profitable than the countrywide average. We have the best loss ratio compared to our neighboring states as well. 

Although it accounts for a great deal of the testimony time in these hearings, commercial auto insurance is only 6.5% of the total insurance market in Louisiana. The statewide loss ratio for commercial auto coverage was 3.93 points more than the national average, making us less profitable when compared to that average. 

The differences compared to neighboring states are minimal, but not quite as good. This is likely due to higher truck lengths and weights, poor road quality, more collisions, and high injury rates sustained in truck collisions.  

State law clearly prohibits “inadequate or discriminatory” rates and gives the commissioner authority to address those on his own. The law says that the commissioner must declare the market noncompetitive and hold a public hearing if he wants to declare a rate excessive. No commissioner has ever done this. 

According to NAIC data and even the most recent testimony of the commissioner, our market is competitive. Louisiana law defines an excessive rate as one that would lead to unreasonable profits but the law also states that no rate can be deemed excessive in a competitive market.

There is no independent evidence that tort reform reduces insurance rates.  In fact, the evidence demonstrates that tort reform does not reduce rates. Our own experience in Louisiana has proven that theory wrong. After tort reform in the mid-1980s in Florida, St. Paul Fire & Marine Company and Aetna Casualty & Surety Company — two of the biggest proponents of tort reform — sought rate increases.

The same was true after reform in Kansas, Washington state, and California. They admitted that tort reform had not worked to reduce rates.   

The “2019 Report of the Actuarial Subcommittee of the Louisiana High Auto Rates Task Force” concluded any “reform” would have no to minimal effect on prices. 

The recommendation projected to bring the biggest rate relief, the admissibility of failure to wear a seatbelt, was enacted exactly as recommended. The actuarial report projected a 5% reduction in rates. Not only was that not achieved, but insurance rates also rose 25% after this and several tort reform measures were enacted in 2020.  

The purpose of the hearings was to explore every avenue to reduce rates for consumers. Attending some of these hearings and watching the rest, I heard much of the same testimony offered in the 2024 session and it focused primarily on tort reform issues. 

Angoff did offer solutions to the insurance premium issues in Louisiana:

• Improve Louisiana’s roads, which are the third worst in the nation. (How can there be states with worse roads?)
• Strengthen truck safety standards, which allow both the heaviest and longest trucks that exceed the allowances of our neighboring states.
• Implement new technology, including electronic stability control, which could prevent or mitigate up to 31,000 crashes annually. Blind spot detection, forward collision warning/mitigation, and lane departure warnings would also help to reduce collisions.
• Strengthen Louisiana’s insurance rating law, which is one of the weakest in the nation. In the last legislative session, we moved to lesser standard of use and file. According to R Street, only 14 other states have this standard of regulation.
• The Department of Insurance could publish premium comparisons that allow consumers to compare prices. That is shown to drive prices down.
• Require all data filed by the carriers to be public. Now, the commissioner is required to keep the data confidential if the insurer designates it as such.

A simple review of this comprehensive report demonstrates that the insurance industry is profitable and competitive in Louisiana and can be made less expensive by implementing some commonsense insurance regulation, improvements to our roads, and truck regulation. 

Now you (and the legislature) know the rest of the story.