Due to high insurance premium costs, high rates of litigated claims and a low median income, Louisianans now pay auto and property insurance rates that are the least affordable in the nation, according to new data from the Insurance Research Council (IRC).
The nonprofit research group reported in a Dec. 13 report that claims frequency and the litigation rate for insurance-related cases are higher in Louisiana than other states which are vulnerable to hurricanes.
“In 2020, the average annual expenditure for auto insurance in Louisiana was $1,495, which is more than 40 percent above the national average,” the report says. “... With an average annual expenditure of $1,965, homeowners costs are among the highest in the country and represent 3.84 percent of the median household income in the state. This is 55% higher than the national average.”
Multiple factors contribute to high insurance costs in Louisiana, including the powerful storms in recent years that have led to waves of litigation after the destructive events, according to the report. The research brief also points to a recent report by the American Tort Reform Association that found a high level of legal-service advertising taking place in Louisiana.
“The fourth quarter of 2020 alone witnessed a staggering $12.4 million spent on advertisements for legal services and soliciting legal claims,” the IRC said. “This accounted for 5.6% of all local legal services TV ads aired in the country during that period.”
Jeff Albright, CEO of the Independent Insurance Agents & Brokers of Louisiana, confirmed the trends identified in the IRC study.
“For years Louisiana has had the highest auto insurance rates in the country because the frequency and severity of injury claims is almost twice as high as the national average," Albright told the Louisiana Record in an email. "Our homeowners insurance is the highest in the nation because we have frequent hurricanes, and many storm claims are also litigated.”
The data used in the IRC study is accurate through 2020, according to the report, but it doesn’t reflect more recent increases in insurance premiums.
Dale Porfilio, the IRC president, said the conditions of Louisiana’s insurance market has caused the insolvency of several carriers, with others withdrawing from the state and still others deciding to restrict consumers’ coverage or raise insurance rates.
“Louisiana has a very high level of attorney involvement in personal insurance claims,” Porfilio said in a prepared statement. “The rate of litigation in personal auto claims in Louisiana is … the second highest in the country, only surpassed by Florida. Homeowners claims in Louisiana were more than 12 times more likely to involve litigation, compared with states other than Florida.”
Such statistics are leading the state to increase reliance on Louisiana Citizens Property Insurance Corp., the state-run insurer, according to the IRC report. In turn, Louisiana lost 1% of its population in 2022 as residents seem to be seeking more affordable locales in other states, the report states.
In the property insurance market, the number of catastrophic claims filed for every 100 exposures to potential property damage claims is six times higher than the national average, according to the IRC. And claims in Louisiana are 12 times more likely to involve lawsuits when compared to states other than Florida, the report says.
Auto insurance statistics indicate similar trends. The frequency of car accidents per 100 insured vehicles in Louisiana involving damage liability claims is 16% higher than the national average, the IRC reports.