Louisiana Raises Minimum Car Insurance Rates

Published: Wed 06 Jan 2010

Perry Begay

The owners of about 40 percent of Louisiana's approximately 2.5 million insured motor vehicles didn't have such a happy New Year's Day when their coverage rates went up under a new law that went into effect that day.

The reason for rate hike for more than 1 million drivers, according to Insurance Commissioner Jim Donelon, was the requirement that minimum liability coverage be increased to cover the rising costs tied to accidents, such as medical care, replacement vehicles and repairs.

For nearly 30 years, Louisiana had allowed car and truck owners to buy a minimum of ''10-20-10'' liability coverage. That meant $10,000 coverage for injury or death to one person in an accident, $20,000 for injury or death to more than one person and $10,000 for damage of other people's property.

Under the new guidelines, drivers must have a minimum of $15,000 coverage for injury or death to one person, $30,000 for injury or death to two or more and $25,000 coverage for property damage. It is referred to as "15-30-25" liability coverage.

The average motorist carrying minimum coverage can expect to pay about $71 more annually for the insurance. Supporters say the increase will barely be noticed by drivers who will pay nearly $6 more monthly for insurance.

Critics say it could take a financial toll on those people with fixed incomes or who are otherwise struggling to exist in a weakened economy. It might force them to join the nearly 12 percent of all Louisiana motorists who drive without insurance but Donelon expects only a slight increase in that pool of drivers.

The roots of the increase can be traced to a bill introduced by Rep. Erich Ponti, R-Baton Rouge, and approved by the Louisiana Legislature in 2008. Republican Gov. Bobby Jindal didn't sign the measure and allowed it to take effect without his signature. A similar bill was vetoed by previous governor Democrat Kathleen Blanco in 2007.

With more than a year's time passed since the bill was approved, many drivers are expected to be taken by surprise. Part of the reason is insurers were not required to notify their clients about the increase.

Also taking effect Friday were about two dozen new state laws, although most likely will not get as much reaction as the insurance rate increases. One law imposes a 2 percent fee on prepaid wireless phone cards with the mandate that revenue pays for improvements of Louisiana's 911 system. A similar fee already exists for phone customers with landline and cellular services.