Despite Improvements, Louisiana Is Still Least Affordable State for Auto Insurance

Max Dorfman, Research Writer, Triple-I

Louisiana’s personal auto insurance affordability improved to 2.67 percent of median household income in 2022 – down from 2.93 percent in 2020 – but it retains the dubious distinction of being the least affordable state, Triple-I’s chief insurance officer told the Louisiana House Insurance Committee in recent testimony.

Dale Porfilio – who also is president of the Insurance Research Council (IRC) – said that by nearly every metric the state’s insurance cost drivers are well above the national average:

• Accident frequency – Louisiana is 16 percent higher than the national average;
• Repair cost severity – Louisiana is 9 percent higher;
• Injury claim relative frequency – Two out of every four property damage claims (when cars hit cars) in Louisiana result in bodily injury claims (49 percent), twice the one out of every four (25 percent) across all states;
• Medical utilization – Louisiana is 47 percent higher;
• Attorney involvement – Louisiana is 24 percent higher;
• Underinsured motorists – At-fault drivers in Louisiana have insufficient liability insurance limits in over 35 percent of multi-car accidents, over twice the 16 percent U.S. average; and
• Claims litigation – Litigation over personal auto claims in Louisiana is more than twice the national average, surpassed only by Florida.

Porfilio noted that for auto insurance affordability to improve, overall expected losses will need to be reduced. Legislation to reduce one or more of these key cost drivers would be helpful, Porfilio said.

As Triple-I and IRC previously reported, the combination of high insurance expenditures and low median income make Louisiana a difficult state in which to lower costs. The frequency of hurricanes hitting the state increases homeowners insurance costs, and the high cost of reinsurance has contributed to the Louisiana’s insurance woes.

In fact, in 2020 and 2021, in the wake of Hurricane Laura and Hurricane Ida, insurers paid out more than $23 billion in insured losses from over 800,000 claims filed.

While Louisiana policymakers were confident a $45 million fund approved in February 2023 to encourage insurers to write property insurance business in the state would help stabilize the market, insurance commissioner Jim Donelon recognized that the approved grants are only the first step toward reducing homeowners’ insurance rates.

As Porfilio’s testimony demonstrated – and the market has dictated – more work is needed to lower costs for consumers and insurers in Louisiana.