Louisiana clinches the title of the least affordable state for both personal auto and homeowners insurance, the Insurance Research Council (IRC) revealed in a new report.
According to IRC’s findings, Louisiana’s insurance affordability crisis is due to a combination of factors, including a series of natural disasters, prevailing economic conditions, and the state’s litigation landscape.
For personal auto, IRC pointed to accident frequency, repair costs, injury claim frequency and severity, medical utilization, attorney involvement, uninsured motorists, litigation claims, and expenses as the key factors driving insurance costs in the state.
Similarly, the homeowners sector faced heightened costs with regards to claim frequency and severity, both in catastrophic and non-catastrophic scenarios, weather risks, and litigation claims and expenses.
Moreover, nearly all of these cost drivers were significantly higher in Louisiana compared to the national average, according to the report.
As a result, homeowners in Louisiana spent 3.84% of their median income on insurance in 2020 – nearly double the U.S. average of 1.94%.
Personal auto expenditures in Louisiana were similarly pronounced, with residents allocating 2.93% of their income to insurance payments, compared to the national average of 1.55%.
IRC president Dale Porfilio highlighted the multi-faceted issues impacting 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, adding that these challenges have led to insolvencies among carriers and the departure of some insurance providers from the market.
Porfilio also zeroed in on the role that Louisiana’s litigation landscape plays in the affordability of personal insurance.
“Louisiana has a very high level of attorney involvement in personal insurance claims,” he said. “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.”
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