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S&P Analysis: Louisiana Seeing Highest Car Insurance Rate Increases

Tort reform continues to be an abysmal failure

by Eric Holl, Executive Director

June 14, 2022

Louisiana drivers are getting the highest auto insurance rate hikes in the country, according to a new S&P Global Market Intelligence analysis of 13 states with publicly available rate change approval data.

S&P Global Market Intelligence says State Farm’s 7.2% rate increase in Louisiana was “the most-impactful single rate increase during the month of April” because it applies to 1 million policyholders, who will pay $95.3 million more in premiums.

Louisiana also had the highest single percentage rate increase of the rate changes highlighted, with a 14.9% increase for Allstate drivers approved by Insurance Commissioner Jim Donelon.

The insurance commissioner approved these new rate increases roughly two years after the passage of major tort reform legislation. He claimed tort reform would lower rates by 25%, and promised Louisiana’s new law would result in rapid rate decreases. Instead, we’ve seen consistent increases.

This legislative session, the insurance commissioner testified against legislation to lower rates for good drivers and improve the health of the auto insurance market. His opposition helped kill the bill. As a result, The Gambit's Clancy DuBos called insurance companies one of "da winnas" of the 2022 legislative session.

See below for a statement from Real Reform Louisiana Executive Director Eric Holl:

“The legislature gave away Louisiana drivers’ legal rights by passing tort reform in 2020, and all we’ve gotten in return is even higher insurance rates. Tort reform doesn’t lower auto rates. We need real insurance reform.”

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Insurance Industry: "Credit Scores" Among Reasons for Louisiana's Rising Insurance Costs. A new report shows that auto insurance rates are skyrocketing, rising by 26% across the U.S. On average, Louisiana drivers pay $2,909 annually, roughly 6.53% of their income for auto insurance. Wayne Watley at Watley Insurance Group lists “credit scores” among the reasons for Louisiana’s rising auto insurance costs, including poor roads and uninsured motorists. Mr. Watley goes on to say, “It’s a challenge because we’re not one of the richest states, but we have some of the highest premiums.” He is correct—and the data backs him up. Insurance companies use credit scores to determine insurance rates for policyholders. Louisiana ranks 48th in median household income and 49th in average credit score . According to a recent study , safe drivers in Louisiana with poor credit pay 111% more than safe drivers with excellent credit ($1,505 / $713). Consequently, Louisiana has the second-highest auto insurance rates in the nation, which leads to more uninsured motorists, another primary cause of higher insurance rates. The use of credit scores in rate setting also creates perverse incentive structures that make Louisiana roads less safe. In Louisiana, safe drivers with poor credit pay an average of $905 more than drivers with a DWI and excellent credit ($3,548 / $2,643). Meanwhile, traffic fatalities increased by 21% from 2019 to 2022 in Louisiana, and the fatality rate per 100 million vehicle miles traveled increased by 18%, according to KPLC . Louisiana desperately needs real insurance reforms that lower costs, protect consumers, hold insurers accountable, and make our roads safer.