Why is Auto Insurance So Expensive in Louisiana?
Updated: Sep 28, 2022
If you look at the annual list of the most expensive car insurance policies by state compiled by insure.com it’s no surprise to see Louisiana currently ranked in second place to Michigan which holds first place.
Louisiana is consistently ranked as one of the top five most expensive states in the U.S. for car insurance premiums, but why is this?
Generally, higher insurance rates can be seen in states that have more claims as a result of bad weather and more hazardous driving conditions such as snow.
However, this is not the case for the Pelican state.
There are a number of contributing factors that we’ll take a look at that keeps the people of Louisiana paying a considerable higher insurance rate then most other states.
What are the driving factors?
There are many factors that will help determine the price of auto insurance premiums.
Some of these factors can be decided by the insured, like your credit rating, driving record and claims history.
Other determining factors such as age, is out of the insured’s hands.
Another driving factor in the State of Louisiana is the number of uninsured and under-insured drivers on the road.
This number is much higher than the average, thus driving up insurance rates for the responsible insured drivers of the state.
It’s estimated that 14 percent of drivers in Louisiana are driving without insurance coverage.
Of those who are responsible and carry insurance, many are carrying minimum required limits on their policies.
According to the Louisiana Insurance Commissioner Jim Donelon in speaking with insure.com.
About 40 percent of the drivers in Louisiana carry the minimum limits of auto insurance that is required by state law on their insurance policies.
This of course leads to many people who find themselves in an accident to rely on the courts to get a bigger payout to cover damages.
Another reason to possibly consider is the cost of gasoline in the state. Louisiana enjoys paying less for gas then many other states.
Therefore, more people are likely to be on the road driving, this of course results in more accidents and claims.
The Main Contributing Factor.
Louisiana, especially the New Orleans area, is a trial lawyer’s heaven.
Louisiana is often referred to by the American Tort Reform Foundation as a “judicial hellhole.”
The overly litigious culture found in Louisiana is a strong contributor to high insurance cost.
It’s no doubt this legal environment leads to Louisiana having more bodily injury claims than many other states, and bodily injury claims cost insurance companies a lot of money.
To give an example of how many lawsuits are filed lets look at some numbers reported by Fox 8’s Lee Zurik that compares New Orleans to other much larger cities.
Number of suits filed by lawyers per 100,000 thousand people.
110, Miami, FL
169, Austin, TX
234, Houston TX
275, Dallas, TX
853, New Orleans, LA
That is a staggering number that for decades has kept Louisiana ranked in the top five states for the most expensive auto insurance.
Another factor that ties in with high bodily injury claims is a very high jury threshold.
In Louisiana, a jury does not hear a civil claim unless the damages are in excess of $50,000.
This high threshold is 28 times higher than the national average among the 14 states that have a jury threshold.
This allows elected judges to make the decisions on cases instead of juries.
Elected Judges, who are basically politicians, will almost always side with their constituents who vote for them as well as the personal injury attorneys who contribute to their campaigns over an out of state insurance company.
This makes it much easier for trial lawyers to file suits that may not have otherwise been filed.
In these suits, settlements are typically much larger than what a jury would have awarded.
Therefore, it’s easier and less expensive for insurance companies to settle cases below the jury threshold than to fight a losing battle in the courts.
All of this together is a factor that keeps many insurance carriers from writing auto insurance in the state.
Louisiana’s overly litigious state drives up auto insurance rates for all its residents.
According to insure.com, Louisiana’s auto insurance rates were 56 percent higher than the national average in 2018, with the typical statewide premium costing motorists a high rate of $2,126 per year on average.
This will not change until the people of Louisiana start a grass roots effort to force its state legislators to act in the best interest of the people and not the trial lawyers.
It should be fairly noted that the Louisiana republican legislators have tried to pass tort reform that would fix some of these problems.
However, democrat lawmakers along with the trial lawyers together has opposed these attempts’ thus keeping them from passing.
Regardless of who is to blame, the high premiums impact low-income earners the most.
To quote a writer in the Advocate paper,
“Imagine a single mother with two kids working two jobs trying to make ends meet forced to pay $4,000 a year for car insurance.
Politicians who often claim to be an advocate for the working poor do little to bring about tort reform that would help lower insurance premiums.
Their allegiance to trial lawyers who generously donate to campaigns apparently supersedes their concern for the poor.”