State Farm drops rates for LA auto policyholders

By TED GRIGGS

tgriggs@theadvocate.com

Advocate business writer



Roughly one-third of the state's drivers could see a small drop in their auto premiums starting Feb. 15, when State Farm Mutual Automobile Insurance Co. cuts its rates by 2.1 percent overall.

State Farm is Louisiana's largest auto insurer, with 969,000 policyholders, the company said. The decrease means an annual savings of $19.3 million for Louisiana customers, or an average of nearly $20 per policyholder.



The last time State Farm cut its auto insurance rate was in August 2000. The company cut rates then by 2.3 percent, or $16.6 million. A year later the company upped rates by 6.5 percent, or $47 million. In 2002, the company upped rates by $133 million, or 14 percent. In April of last year, the company raised rates by 0.9 percent.



State Farm was able to reduce its rates this year because customers have filed fewer claims than in the past, although the amount per claim is around the same, spokesman Morris Anderson said Thursday.



"We would like to think that people are driving a little bit safer. Cars are certainly a lot safer than in the past" Anderson said.



Insurance Commissioner Robert Wooley said some much smaller auto insurers have also reduced their rates, while others have increased rates by smaller percentages than in the past few years.



"It's all part of the market softening up after the reinsurance market hardened after 9-11," Wooley said.



Reinsurance is the insurance that insurance companies buy to reduce their risks. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company.



Wooley said auto insurance rates have also benefited from the "flex-band rating system." The law, passed in 2003, allows insurers to increase or decrease their rates by 10 percent once a year.



Insurers aren't as reluctant to reduce rates when business is good because they know they can also raise rates without incurring a political battle, Wooley said.



The savings per customer in State Farm's Feb. 15 cut will vary, but the largest decreases will be in collision and comprehensive coverage, Anderson said. Comprehensive coverage pays for losses from theft, storm damage, vandalism and glass breakage.



The company is also revising its discount program for auto insurance customers with more than one State Farm policy, Anderson said. A high percentage auto insurance customers also buy their homeowner's policies from State Farm.



Most customers will see a larger discount than they now receive, Anderson said. The maximum discount possible is 18 percent.