Lawmakers reject bill that removes advertising costs from insurance premiums

BATON ROUGE, La. (Louisiana Illuminator) - State lawmakers shot down a proposal this week that would’ve stopped insurance companies from passing on the cost of their advertising campaigns to their customers in Louisiana.

House Bill 252, sponsored by Rep. Robby Carter, D-Amite, failed Tuesday on the House floor in a 27-68 vote. Party line defections included four Republicans who voted in favor of the proposal and seven Democrats who sided with the chamber’s GOP majority to kill the measure.

Currently, state law allows insurance companies to factor in their advertising expenses when calculating premiums billed to Louisiana policyholders.

The country’s top four insurance companies — Progressive, Geico, State Farm and Allstate — spent nearly $5 billion on advertising last year nationally, according to a report in Insurance Business Magazine.

When presenting his bill to the chamber, Carter estimated Louisiana residents are subsidizing at least $100 million of ad expenses for the “big four.”

“And that’s just four insurance companies,” Carter said, suggesting the true cost is much higher. “Now, where would you rather have that money? In your constituents’ pockets or paid out to Aaron Rodgers and the zombie man or Allstate and any other high-priced peddlers who are out there peddling this insurance?”

Carter was referring to State Farm’s ad campaign with NFL quarterback Aaron Rodgers and a Geico commercial that features a zombie character. He also mentioned the Aflac duck and questioned how much that company was paying Nick Saban to star in its commercials.

Rep. Sherman Mack of Albany, one of the four Republicans who supported the bill, pointed out how insurance lobbyists and the Louisiana Association of Business and Industry (LABI) sold the idea of “tort reform” to the legislature in 2020. LABI President Stephen Waguespack, who is now running for governor, claimed auto premiums in Louisiana would drop between 10% to 25% if lawmakers passed the legislation he helped create that made it harder for policyholders to sue insurance companies.

Waguespack’s promises never came to fruition. Insurance costs actually went up in Louisiana and are among the highest in the country, while policyholders and accident victims now have fewer options for recourse through litigation. Lawmakers, many of whom receive campaign donations from insurance companies and LABI, have largely ignored the tort reform failure.

“Rep. Carter, you were here at the beginning of this term when we all got berated that if we didn’t pass tort reform, something bad was going to happen to us,” Mack said. “…Has any rate reduction whatsoever happened in the last three years?”

Carter said he knows of no rate reductions since lawmakers passed the LABI-supported package. His legislation was modeled off similar laws in Texas and California, he said.

“I believe this bill is the only one we’ve voted on in three years that will actually bring rates down,” Carter said.

Several Republicans spoke against the bill, criticizing it for failing to guarantee a rate reduction or saying it would stifle the state’s business climate. Rep. Lance Harris, R-Alexandria, asked for financial data showing how the bill would reduce premiums.

“Where is your proof that this is actually going to bring the rates down?” Harris said.

Carter said he couldn’t guarantee a reduction but promised to repeal it if it fails to work in three years. No one else is offering common sense solutions to try to bring insurance rates down, said Carter, who criticized the lack of concern from some of his colleagues who continue to sponsor legislation from the insurance industry despite the previous false claims on tort reform.

“I haven’t heard not one of y’all say that y’all would repeal tort reform from three years ago,” he said.

Another proponent, Rep. Nicholas Muscarello, R-Hammond, said the legislature passed the 2020 tort reform package without any data guaranteeing a rate reduction.

Rep. Larry Frieman, R-Abita Springs, spoke against the bill, saying insurance is just like any other product whereby the state government doesn’t tell companies how to price their products.

Pushing back on Frieman’s claims, Rep. Joe Stagni, R-Kenner, pointed out state law mandates drivers, homeowners and many others to purchase various forms of insurance. The government can and should regulate the price of products it forces people to buy, he said.

Insurance differs significantly from most other consumer products and is subject to heavy state regulation. Insurance companies have to get their prices approved by the state insurance commissioner to ensure they aren’t excessive, inadequate or discriminatory.

Companies must show how they’ve calculated their rates with respect to several baseline factors. Current state law prohibits insurers from including in their premiums any costs from fines and penalties that courts or regulatory bodies place on them.

“We’re not telling businesses what products to sell, but this body has gone on record telling our citizens what product they have to buy,” Stagni said. “And with a wink and a smile, the price gets elevated because advertising is included in that product. You’re telling them they have to buy it…and those advertising costs are built in.

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