Louisiana report finds lapsed insurance fees cost drivers more than DUIs
Louisiana’s legislative auditor has suggested the legislature consider evaluating state law to help mitigate the negative impacts of license suspension and reinstatement fees stemming from insurance cancellations.
As of June 2024, about 255,657 (9.1%) of the state’s 2,811,435 personal driver’s licenses were suspended and/or revoked. Insurance cancellations were the most common, with 201,780 violations (79.9%).
“Reinstatement fees must be paid before OMV (Office of Motor Vehicles) can return a license that has been suspended or revoked to good standing, which can delay individuals who are otherwise compliant from regaining an active license,” the report says.
The report found that 58.1% of driver’s licenses that were suspended and/or revoked as of June 2022 were still not active as of June 2024. This means that less than half of the drivers were able to resolve their violations and/or avoid committing subsequent violations during the two-year period.
“More than three-quarters of the licenses that were suspended and/or revoked in both June 2022 and June 2024 had unresolved insurance cancellation violations in both years, reflecting both the frequency of these violations and the difficulty some drivers may face in resolving them,” the report said.
Reinstatement fees for insurance cancellation violations are more expensive than other violations, the report says. The report found that fees start at $100 and extend up to $500 for insurance cancellation. Reinstatement following other offenses, such as driving under the influence, starts at $100 for the first offense and caps at $300 for the third offense.
The amount owed also increases the longer a lapse in insurance coverage continues. One lapse can result in multiple violations.
“These fees are also the only type of fees that OMV sends to the Office of Debt Recovery (ODR) for collection, which adds 15% to the amount owed,” the report says. “In addition, Louisiana’s high vehicle insurance prices and low median income compared to the nation overall likely contribute to delayed reinstatements as well as the frequency of repeat insurance cancellation violations.”
The report notes that state law was amended in 2024 to alleviate some financial challenges for drivers who commonly encounter insurance cancellation fees. However, it said further changes could be beneficial.
It notes that other states with similar fees have longer grace periods, adding that 2024 legislation created a Reinstatement Relief Program for insurance cancellation fees that could be expanded to all reinstatement fees.
“Lastly, reevaluating laws that require driver’s license suspension and reinstatement fees for non-driving violations could reduce negative impacts of suspending driving privileges and reduce OMV’s administrative burden,” the report says. “However, according to OMV, if these changes were made in law, OMV, DPS, and other programs that rely on funding from reinstatement fees would need to find new sources of revenue.”
The report found that the state’s reinstatement fees accounted for 92% of the OMV’s budget, which was $74.4 million in 2024.
Federal insurance report
The Federal Insurance Office released a report earlier this year that found 14% of drivers in 2022 did not maintain legally required insurance coverage nationwide.
“Reasons that people may drive without insurance vary, but there is evidence that cost is a factor,” the report says. “Consumers with limited means may forego auto insurance to prioritize paying for basic necessities such as food and shelter. Consumer concerns about increased insurance costs appear to have escalated in recent years, which may correlate with an increased number of uninsured drivers.”
Between 2015 and 2022, premiums for minimum required state-mandated personal auto insurance, or financial responsibility limits, increased, while loss frequency decreased, the report says.
Michigan lapsed insurance bill
In May, Michigan Sen. Jeff Irwin (D-District 15) introduced Senate Bill 329, which would have eliminated reinstatement fees and rate increases for drivers who had a coverage lapse. The bill did not move out of committee.
“People shouldn’t be penalized for having a lapse in coverage because they are sick or otherwise unable to drive,” Irwin said in a press release at the time of introducing the bill. “For people coming back into the market for car insurance, we need to make it easier, not harder, for them to pay into the system.”
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