Gov. Brian Kemp’s push to curb abusive lawsuits cleared a significant hurdle this past week. The state Senate approved a comprehensive reform bill on a mostly party-line vote (one Republican voted against it, and one Democrat for it).
Along the way, opponents lodged a spate of wrong-headed objections. One complaint struck me as particularly deceptive in its apparent simplicity: Why won’t insurance companies say how much they’d reduce premiums if this bill becomes law?
That seems like a fair request. If you say a bill is going to solve a problem, shouldn’t you be able to say how much it will help?
Yet, at the risk of defending insurance companies – which is about as popular as selling hot dogs outside a vegan convention – there are good reasons an answer is harder to come by than you might think.
Start with the fact that we are talking about multiple companies, not just one. They all price risk differently. They have varying levels of exposure to the numerous types of liability their policies cover. Some of them have larger market shares than others.
If these things weren’t so, all of the companies would offer the same prices for the same levels of coverage. As someone who recently reduced his auto and home insurance premiums by more than $1,000 a year by switching carriers, I can attest they don’t all charge the same price.
If the major insurance carriers don’t compete with one another, then why do they advertise so much? Anyone who watched as much football this past season as I did is well aware that the Mayhem guy, Rob Gronkowski and Patrick Mahomes are constantly pitching you on their preferred insurer.
Still, price isn’t the only basis on which they compete. Some carriers are renowned for their customer service. Others may be willing to sell policies to riskier clients – and price their products accordingly. And so far we have been talking only about individual or family coverage; business insurance, which is the main driver of Kemp’s tort-reform effort, adds still other layers of complexity and competition.
Rates have been going up across the board in Georgia because the cost of insuring families and businesses has been going up. Abusive lawsuits are one way Georgia has distinguished itself from other states in a negative way.
Even if we set aside all these differences and looked at the total industry, it would be impossible to quantify future savings.
For example, it is hard to predict how quickly the reforms could start to change behavior. Many of the reforms in the bill the Senate passed are procedural. They’re designed to curb abusive, arguably dishonest, tactics in the courtroom, such as charging defendants multiple times for the same plaintiff’s attorney fees (yes, that’s currently legal). But that doesn’t stop people from filing lawsuits and then seeking other ways to skim extra money off defendants. Nor does it necessarily prevent the old tricks from being used in cases already filed, which could still command unreasonable payouts that push up premiums.
Other, unrelated factors could drive up rates beyond the savings generated by the reforms. Another hurricane or other natural disaster could strike Georgia. No company wants to promise a rate decrease and then not deliver because of unforeseen circumstances.
Finally, insurers could put a projection on paper, but everyone knows the number will probably be wrong. Maybe it’ll be high, maybe it’ll be low. But if they could forecast events so precisely, they wouldn’t have bad underwriting years that led to rate increases in the first place.
Reform opponents know this, too. They just want to be able to hammer the companies for being wrong, when that’s the sure-fire outcome.
Because this is a competitive industry, any reforms that curb abuses and encourage insurance carriers to return to Georgia ought to lead to lower premiums. But how much and how quickly would be impossible for even the sharpest actuary to predict.
