Bill Banning ‘Step-Down’ Clauses in Auto Policies Advances in Louisiana

Louisiana House Bill 208, which would force insurers to provide the maximum policy limits for automobile liability insurance coverage to anyone driving the insured’s vehicle, has been approved by the House Committee on Insurance, according to the Property Casualty Insurers Association of America (PCI).

PCI says the bill is anti-consumer in that it prohibits insurers from offering policies that have a provision commonly referred to as a “step-down” clause. This provision allows the amount of liability insurance to automatically reduce to the state minimum limits when the vehicle is being driven by someone other than the insured or a relative living in the household.

PCI says the measure will limit insurers’ ability to provide cost reduction strategies to consumers.

“The practical effect of this legislation is that insurance companies are prevented from offering consumers policy options that may help them control or reduce costs,” said Greg LaCost, assistant vice president and regional manager for PCI. “The intent of the step-down provision is to provide you as the vehicle’s owner and all other relatives in the home with maximum coverage. However, if you loan your car to a neighbor and he or she causes an accident, then their insurance should provide some coverage. Only three states have enacted legislation that prohibits step-down provisions.”

LaCost also commented that it “is disturbing that the Department of Insurance would support such an anti-competitive and anti-consumer bill. We understand why insurance agents may be against this consumer cost-saving mechanism since they can receive more commissions because of the higher cost of insurance.”

Louisiana motorists already pay the third highest auto insurance rates in the country, the PCI said.

State-mandated minimum financial responsibility limits increase this year by 10 percent or more for consumers who purchase the state minimum limits.

Source: PCI

Topics Auto Louisiana