Triple-I: Louisiana insurance market faces challenges despite reforms

State seeks solutions to stabilize insurance market

Triple-I: Louisiana insurance market faces challenges despite reforms

Insurance News

By Jonalyn Cueto

While legislative reforms in 2024 marked a significant step toward stabilizing Louisiana’s troubled insurance market, more comprehensive measures are needed to address longstanding issues of excessive litigation and escalating costs, according to a recent report by the Insurance Information Institute (Triple-I).

The report, Trends and Insights: Louisiana Insurance Market, highlights that Louisiana remains one of the least affordable states for personal auto and homeowners’ insurance. Research from the Insurance Research Council (IRC) indicates that, in 2022, the average annual expenditure for auto insurance in Louisiana reached $1,588 – nearly 40% above the national average. Homeowners insurance was similarly costly, with an average annual expenditure of $2,178, which is 54% above the national average and accounts for 3.81% of the state’s median household income.

“Louisiana, with the leadership of its insurance commissioner, is potentially on the path toward stabilizing its insurance market,” said Sean Kevelighan, CEO of Triple-I. “We have also seen in states such as Florida that comprehensive legal reform works. Louisiana has more to do, and we hope the progress being made stays on course.”

High costs and complex challenges

The high cost of insurance in Louisiana has been attributed to several factors, including frequent severe weather events, rising repair and construction costs, and a litigation-heavy environment. Louisiana’s low average household income further exacerbates affordability issues, the report said.

According to Dale Porfilio, chief insurance officer at Triple-I and president of the IRC, the financial strain on insurers in the state has been significant. In 2020 and 2021, hurricane-related losses – including damages from Hurricanes Laura and Ida – caused homeowners insurers’ combined ratios to soar, indicating substantial underwriting losses.

“The state has faced multiple major weather events, with extensive litigation following each natural disaster,” Porfilio explained. “Rising auto-repair and construction costs, combined with the state’s relatively low household income, have compounded these issues.”

A combined ratio, a key measure of underwriting profitability, compares claims and expenses paid to premiums collected. A ratio below 100 indicates profit, while one above 100 reflects a loss.

The report also found that nearly 50% of auto insurance premiums in Louisiana go toward covering injury claims – double the national average. This reflects a high frequency of bodily injury claims, with 49% of vehicle accidents in the state resulting in such claims, compared to much lower rates nationwide.

Key findings of the report:

  • Louisiana homeowners insurers need a combined ratio of 85 for 24 years to recover 2021 losses.
  • Residents spend 2.7% of their income per car annually, with nearly 50% going toward injury coverage rather than repairs.
  • Louisiana households allocate 1.3% of income to auto injury coverage, compared to 0.6% nationally.
  • Injury claims in Louisiana are nearly double the national average, with 49% of accidents involving bodily injury claims.
  • Low personal incomes and a litigation-heavy environment worsen auto insurance affordability in the state.

The full report is available through the website of the Insurance Information Institute.

Do you have something to say about the recent findings? Let us know in the comments below.

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