Four of Louisiana’s six largest auto insurance companies increase rates for people who have lost a spouse compared with what is charged when they are married. Currently, the Louisiana Department of Insurance allows insurance companies to charge this “widow penalty” even if a customer has an unblemished driving record.

The penalty applies regardless of the surviving spouse’s gender, though Louisiana also allows insurers to use gender as a factor in determining rates, according testimony provided last week to a legislative committee by the state’s chief actuary, Richard Piazza.

“Every driver in Louisiana has to purchase auto insurance, regardless of whether or not their spouse is alive,” said Douglas Heller, a nationally-acclaimed auto insurance expert who has been researching and reporting on the industry for more than twenty years. “The fact that insurance companies charge more to perfectly safe drivers once their husband or wife passes away is both unnecessary and unseemly, and this widow penalty should be prohibited.”

As a part of our ongoing investigative series “Wrecked: How Auto Insurance Takes Louisiana for a Ride,” the Bayou Brief is working with Heller to assemble and analyze data about the industry’s practices and the state’s regulatory framework. His findings on the “widow penalty” are one of many alarming factors that directly contribute to Louisiana’s ranking as one of the most expensive states in the nation for auto insurance.

Using data gathered from company websites, Heller found that customers throughout the state could see their auto insurance rates jump by as much 15% if they report that they are widowed and no longer married. His test subjects were sixty years old, and regardless of gender, they were subject to identical hikes in premiums.

In New Orleans, for example, Progressive charges both widows and widowers $172 more per year to buy its cheapest, bare bones policy. A widow purchasing a standard policy with comprehensive and collision coverage faces a $470 penalty from Progressive for losing her spouse.

Allstate and GoAuto Insurance also penalized widows with premium increases of six percent and nine percent, respectively. Geico charged widows four percent more in New Orleans but charged virtually the same premium to married and widowed drivers in other parts of the state. State Farm and Farm Bureau do not impose a widow penalty.

Figure 1 shows the additional amount that the state’s largest insurers charge widows for the state mandated minimum auto insurance coverage even if they have perfect driving records.

The research determined that for most companies, the rate hikes were consistently imposed on widows throughout the state, except that Geico’s widow penalty only appeared to impact drivers in New Orleans.

Not surprisingly, the penalty was most acute in New Orleans, where overall premiums are highest. But drivers in Baton Rouge, Lafayette, and Shreveport can also expect to face rate hikes when they lose their spouse, depending upon which company insures them, as shown in Figure 2.

In 2017, Maryland Gov. Larry Hogan (R) signed legislation outlawing the auto insurance widow penalty in that state, and the Maryland Consumer Rights Coalition estimates that drivers with deceased spouses realized annual savings of nearly seven million dollars. There have been no reports of adverse market impacts in that state, and, in fact, in 2019, the governor is expected to sign legislation prohibiting a widow penalty in homeowner’s insurance pricing as well.

According to Heller, the fact that two large insurers – State Farm and Farm Bureau – do not charge any widow penalty provides clear evidence that a driver’s status of married or widowed is not an important measure of accident risk and not actuarially essential for pricing auto insurance. He noted that in order for companies to charge a lower rate to married drivers the insurers are effectively forcing widows and other unmarried drivers to pay an unwarranted subsidy. Heller surmises that insurance companies see more of an opportunity to sell additional insurance products, like life insurance policies, to married drivers than widows.

“Insurance company executives may have some marketing reason that they want to penalize good drivers for having lost a spouse, but there is no legitimacy to this, and the Department of Insurance or lawmakers should stop it,” he said. “This widow penalty is a reminder that the insurance companies are pretty unscrupulous when it comes to the premiums they charge us for the coverage we are required to buy.”