MALVERN, PA — A new brief from the Insurance Research Council (IRC) has revealed that Louisiana is the least affordable state in the U.S. for both personal auto and homeowners insurance. The IRC, an affiliate of The Institutes, attributes this to a mix of factors including multiple natural disasters, economic conditions, and the state’s litigation environment.
According to the IRC’s data, residents of Louisiana spend a higher percentage of their income on personal insurance compared to other states. In 2020, expenditures on homeowners insurance in Louisiana accounted for 3.84 percent of median income – almost double the national average of 1.94 percent. Only Florida, Oklahoma, and Mississippi had rates exceeding 3.00 percent. For personal auto insurance, Louisiana again topped the list with expenditures equating to 2.93 percent of income, much higher than the U.S. average of 1.55 percent.
Dale Porfilio, IRC president and chief insurance officer of the Insurance Information Institute, explained that several factors contribute to the affordability issues in Louisiana’s personal insurance sector. “Rising auto repair and construction costs as well as claims litigation and the state’s relatively low household income have compounded the issues,” he said. Porfilio also noted that the challenging insurance climate has led to the insolvencies of several carriers and the withdrawal of key insurance providers from the market. Many remaining insurers have responded by limiting coverage and raising premiums.
The IRC’s analysis looks at the affordability of personal insurance for the overall population and does not focus on specific demographic or geographic risk profiles. Additionally, the data only covers up to 2020, meaning recent increases in personal insurance rates are not reflected.
In Louisiana, nearly all insurance cost drivers exceed the national average. For personal auto insurance, these include accident frequency, repair costs, injury claim frequency and severity, medical utilization, attorney involvement, uninsured motorists, litigation claims, and expenses. For homeowners insurance, cost drivers include claim frequency and severity for both catastrophe and non-catastrophe claims, weather risks, and litigation claims and expenses.
Porfilio added, “Louisiana has a very high level of attorney involvement in personal insurance claims. The rate of litigation in personal auto claims in Louisiana is more than twice the national average – 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.” This high rate of litigation significantly contributes to the state’s insurance affordability issues.
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