Louisianans should expect vehicle insurance to continue its price spike of recent years, the state’s insurance commissioner tells The Advertiser.
Jim Donelon say three floods in 2016—the latest of which damaged or destroyed 110,000 vehicles in south Louisiana—will likely exacerbate for at least “a couple of years” a trend of rising insurance rates in this state.
Donelon says of the vehicles destroyed in the August heavy rains and floods that stretched from near McComb, Mississippi, to Jefferson Davis Parish, perhaps 50,000 to 60,000 were covered by comprehensive insurance, which covers flood losses for consumers.
About 40% of the state’s vehicle insurance consumers purchase insurance that covers them minimally under the law, but doesn’t pay for property losses such as flooded cars.
That’s no surprise, says Bill Ferguson, who teaches insurance at the University of Louisiana at Lafayette’s B.I. Moody III College of Business. Ferguson says as vehicles age and lose value, some drivers, pressed for money and reluctant to pay high premiums, opt to cut back on their insurance. Sometimes, that leaves them exposed financially to events such as floods.
“That’s why they drop collision on vehicles, to save money. But if you hit a deer, have a wreck or your car gets stolen, you have exposure,” he says.
Donelon says lenders who finance vehicle purchases require that purchasers get comprehensive insurance. That means that many vehicle owners whose vehicles were ruined in the flood were or will be able to replace their rides. He says a great majority of Louisianians with flood losses have already filed their claims.
