Thursday, July 22, 2010
Baton Rouge, Louisiana
A LOUISIANA DISASTER MORE COSTLY THAN THE GULF OIL SPILL!
The present financial disaster in Louisiana has cost the Louisiana economy almost three billion dollars. Check this figure again. Not three million or 300 million but three billion dollars. And the timing could not be worse. The Bayou state’s economy is on a plunging downward spiral. Education will experience major cutbacks, new construction projects are on the verge of grinding to a halt, and basic government services may come to an abrupt end. So why the huge financial hole? It’s the oil spill, right? Read on.
Sure, the oil castrophe all along the Louisiana coast will have a damaging economic effect on the state’s already dwindling economy. But if the new capping procedure put in place last week holds up, cleanup efforts can quickly become more effective with projections of relative normalcy along the Gulf coast within a year. So the oil spill damage to the economy will hopefully be mitigated, with the continuing financial help from BP and the federal government.
However, there is a different cause of a $3 billion loss to Louisiana citizens that continues year after year with little apparent concern being expressed from a host of responsible public officials.
What if you were to consider moving to Louisiana, but were told there is a mandatory surcharge that applies in no other state, requiring you to pay the sum of $1100 or more, just for the privilege of living there? And every other Louisiana citizen who buys a home and owns a car has to pay the same surcharge. Would you move there?
That is exactly what is happening in Louisiana now. The surcharges are from the cost of insurance, and if you live in Louisiana, you now have to pay the highest premium costs in the nation. And not just by a small amount when compared to other states. Louisiana exists in its own world of escalating insurance costs that are completely out of line with the rest of the nation.
Consider auto insurance. The southern average of states surrounding Louisiana is significantly below the national average. The U.S. national average rate is $1,812 as of April 2010. Mississippi comes in much cheaper at $1,537 (15.2% less expensive than national figures). Alabama is even cheaper at $1,457 (19.6% less expensive). Texas has an average of $1,767 (2.5% less). The Louisiana average rate is $2,245 — a whopping 23.9% above the national average.
When you add up the extra amount of money it takes for a car owner to live in Louisiana compared to the national average, the extra sums paid total $1000. And for the most part, these extra premium costs are sucked away to out of state banks for the benefit of national insurance companies.
What about property insurance? The latest figures show that Louisiana is also at the top of the list for having the highest premium rates. The average national premium for home insurance is $690.62. The south has a higher rate because of the hurricane threat. The average homeowner premium for southern states is $801.75, which is 16.1 % above the national average.
Mississippi, Louisiana’s neighbor right on the Gulf, comes in at $964 (down 5.1% from last year). Texas, which also shares a coast with Louisiana, has an average rate of $932 (down 0.9%). Alabama has a rate of $790, and Florida, with the greatest hurricane exposure in the country, has a higher rate a $980. Florida is regularly chastised by Louisiana insurance officials and legislators as being too reckless with their regulatory approach.
Florida’s rate actually dropped last year, and considering their hurricane risk, the Florida rate is, on average, surprisingly only $980 (down 0.1%).
So how did Louisiana do? The average cost for a Louisiana homeowner continued to be the highest in the country at $1392. This is an increase of 0.2% from last year. No surprise, since Louisiana officials pay scant attention to insurance rates and make little effort to lower them.
Rates in the health and workmen’s compensation fields show the same trends. In the auto and property areas alone, Louisiana property owners are paying some $1100 more than the average of all other states throughout the country.
Are Louisiana public officials, including legislators and insurance bureaucrats, up in arms demanding accountability and confecting a litany of ways to get insurance rates to come down? There’s been nary a peep or a whimper. Insurance issues were hardly mentioned in the most recent session of the legislature.
The cost of insurance is the biggest single drawback to business development in Louisiana. $5 Billion dollars that could be used to fill huge and continuing budget holes is being wasted away. But Nero fiddles while Rome burns. And when the oil debacle is old news, a much greater burden of high and unfair insurance costs will continue to hold back struggling Louisiana for decades to come.
Peace and Justice
Jim Brown’s syndicated column appears each week in numerous newspapers and websites throughout the South. You can read all his past columns and see continuing updates at www.jimbrownla.com. You can also hear Jim’s nationally syndicated radio show each Sunday morning from 9 am till 11:00 am central time on the Genesis Radio Network, with a live stream at http://www.jimbrownusa.com.