When it comes to car insurance Louisiana is Murphy’s Law meets the Perfect Storm: All the bad things that push rates up—wet weather, bad roads, heavy traffic, drunk driving, etc. —we’ve got in spades.
Louisiana tops the list of most expensive states for auto insurance, with an average annual premium of $2,740, according to Insurance.com’s 2007 Mid-Year Auto Insurance Pricing Report. That’s despite recent rate decreases (6.1% in 2005 and 3.4% in 2006), and despite tough laws aimed at reducing the number of uninsured motorists on the road.
A multitude of factors give us high rates, though the main culprit seems to be ourselves: Louisiana has greater “frequency of claims” than other states. It’s related to the fact that we love to sue each other. That’s why our rates are the highest, say industry insiders.
Rich Piazza, chief actuary for the Louisiana Department of Insurance, ticks off the various factors that dictate premiums rates in general and high rates in particular.
Blame the weather. Four of the 10 rainiest U.S. cities are in Louisiana, according to a study by San Francisco-based WeatherBill Inc. New Orleans ranked third (behind Mobile, Ala., and Pensacola, Fla.) with an average of 64 inches; Baton Rouge, Lafayette and Miami are tied for fifth with 62 inches; and Lake Charles is 10th with 58 inches.
Blame culture, i.e., drive-thru daiquiri shops. Louisiana’s love of excess no doubt equals more expensive car insurance.
“That’s part of the cultural difference in Louisiana,” Piazza says. “It seems to be tolerated more here than it is in many other states.”
Just not by insurers. Despite a crackdown on drunk driving over the past decade, the state’s historical celebration of excess likely continues to makes insurance industry actuaries purse their lips.
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Blame the roads. Long-haul truckers will tell you Louisiana’s interstates are the worst in the country.
And there’s the traffic, including Interstate 10’s regular transformation from expressway to parking lot. Even Lafayette, which likes to put down Baton Rouge over quality-of-life issues, is hobbled by gridlock on a daily basis.
“That’s Louisiana,” Piazza says. “It’s the way most of us live.”
Strangely enough, the insurance industry considers Louisiana an urban state, Piazza says, since most of the population lives in cities—not big cities, but cities nonetheless. Urban driving results in more accidents than rural driving, hence higher rates. Fortunately, your chance of hitting a deer in Louisiana is considerably less than the national average.
And while the state may be considered “urban” by the insurance industry, its roads often are not. Piazza lives in the southeast part of East Baton Rouge Parish. One of the roads he takes to and from work every day is two lanes, full of S-curves, lacks a shoulder and has four-foot ditches on either side.
“If you’re really not paying attention, there’s no room to recover,” he says. “And if you go in, it’s over with. The roads are not forgiving in many parts of state.”
There are plenty of other reasons Louisiana wins the award for most expensive insurance, including higher taxes on insurance than other states and the hundreds of thousands of automobiles drowned by Katrina. But the overriding factor is frequency of claims. High frequency means higher premiums, and nobody beats Louisiana for frequency.
“When you compare Louisiana to other states, the frequency by which claims are reported to the insurance industry is much greater than in other states,” Piazza says. “The next logical question is why. I don’t know.”
Cissy Landry, a spokeswoman with State Farm Insurance, says the frequency of claims in Louisiana has fallen some over the last four and half years, though the state is still well above the company’s average. In 2006, Louisiana reported more than double the bodily injury claims and 33% the property damage (wrecked car) claims than was reported company-wide, Landry says.
“In our five-state zone, which includes Arkansas, Oklahoma, Kansas and Missouri, Louisiana has the highest number of reported claims,” she says.
Louisiana’s average payouts per claim—“severity of claim,” in the lingo—have also gone up, from $1,794 in 2003 to $2,550 in 2007. Still, it’s well below the company average.
You’d think Louisiana’s mandatory liability insurance law and tough statutes to enforce it—you can have you car towed if caught without proof of insurance—would push down premiums. Piazza says the incidence of uninsured driving in Louisiana is half what is used to be. The Insurance Research Council estimates the state’s uninsured motorist population at 10%. That’s considerably less than our neighbors—ranging from Mississippi’s 26% to Texas’ 16%—as well as the U.S. average, which is 14%.
Yet Louisiana’s impressive showing in this regard apparently doesn’t translate into lower premium rates for drivers with insurance. Louisiana leads the pack at $2,740; Mississippians—despite their high percentage of uninsured motorists—pay an average annual premium of $1,893, according to Insurance.com.
The good news is that insurance rates nationally have been trending downward, with the exception of a few states.
But Louisiana is still the frequency-of-claims leader. Why? Maybe we’re the worst drivers in the nation and have more crashes than everybody else. No such luck, says Jamie Ainsworth of the Louisiana Highway Safety Commission.
“What you’ll pretty much find is that maybe were a little worse than the rest of the country,” she says.
But we do have more drivers who refuse to wear seat belts, meaning a crash is more likely to produce injuries. We’ve also got more drunks behind the wheel than a lot of states, which tends to push up the fatality rate. Those things definitely influence the high frequency of claims. Also, Louisianans love to sue each other.
During the past year State Farm has processed more than 7,000 lawsuits stemming from Louisiana car crashes, Landry says. The cost to defend those lawsuits is double what the company spends in the other four zone states.
Ainsworth says every presentation she’s heard from the Louisiana Property and Casualty Insurance Commission arrives at the same conclusion. “The common theme is we’re just more of a litigious state.”
Comments
Posted by fourx5 on November 7, 2007 at 1:07 p.m. (Suggest removal)
I'm not sure the title of the article does it justice - nor is it entirely accurate.
Blaming the lawyers is an easy tactic, but I think a specific subset of the Louisiana law and victim culture is to blame - the billboards all over north Baton Rouge with smiling chiropractors and (dare I say it?) shyster lawyers like the famous Morris Bart are really to blame for the incidence of suits stemming from normal, everyday fender-benders.
Aside from the Louisiana Bar association actually coming down on these clowns or policing their ethics policies, I'm not sure there's a lot the state can do, as long as unprofessional lawyers like Bart continue to prey on the lower class, promising them 'easy money' for what are, after all, accidents.
But there's a bigger problem in Lousiana: Your roads and drivers are truly terrible.
You could try legislating higher standard for drivers, but knowing the state I grew up in, I don't see that as very likely - the old joke about "getting your license out of a box of Cracker Jacks" has never been more true in Louisiana.
Drivers aren't required to know basic maintenance, safety, or courtesy to get a license - and most of them still fail the driver's test the first time.
A dear friend of ours was killed two months ago when he went off the road with his wife on their way to celebrate their one-year wedding anniversary. He was speeding, but the biggest factor in the crash was that he died in a new, 'safe' car after hitting an exposed concrete culvert on an unimproved, bumpy, ungraded two-lane "highway". Roads in Louisiana are still made for horses, not cars.
Here in California, even along the most remote back roads, Caltrans (our DOT) maintains reasonable shoulders, graded curves, and decent repaving intervals. We pay higher taxes than Louisianians, but in return we get some great, well-thought-out roads that are properly maintained. Sure, we don't have to deal with subsidence because of soft soil (at least not on most roads), but we have cliffs, mountains, river deltas and other challenges that seem to be dealt with very well.
Posted by fourx5 on November 7, 2007 at 1:21 p.m. (Suggest removal)
Contd.
I live in Silicon Valley, and the median value (and collision repair costs) of cars on the road here has got to be at least 3-4x what it is in Baton Rouge. Despite that, we pay less than half the insurance we paid while living in a south Baton Rouge zip code. Here are more of the reasons why Louisiana has such high insurance rates - and some ideas to help fix that problem.
-Fix your drivers. Legislate new, tougher tests that stress not just the road rules, but the reasons why - passing on the right creates congestion and leads to accidents, for example. Stress courtesy and traffic-calming attitudes at the DMV, and start giving tickets out for something besides speeding and blowing stop signs. Stiffen penalties for roadside littering and create hotlines for littering. Teach drivers the importance of achieving highway speed when merging to reduce congestion, and stop pandering to rich neighborhoods who resist modern traffic planning.
-Fix your cars. Louisiana has some of the most beat-up, poorly maintained cars anywhere. You can't get water or air at most stations because the pumps are broken, and trying to get free water and air is like trying to beat the Tigers this season. Mandate tougher inspection laws and free water and air, and start pulling over the idiots who are clearly operating unsafe vehicles. Then impound them. Gas is so cheap (no, really, it is) that you'll never see an uptake in public transportattion unless you take some of those beaters of the street.
-Fix your roads. Don't just repave those dangerous country roads. Realign them, grade them, and improve sightlines and access. Put down sidewalks and fund mass transit before widening roads. Demand accountability from state and local contractors, and drive home the importance of funding a modern and maintained infrastructure. Baton Rouge is laughable when it comes to getting around - you use neighborhood streets as arteries, and quail at the thought of creating expressways, which could considerably improve flow. Even Airline Highway - which should be a limited access expressway - looks like something out of a video game.
-Fix the attitude. Lean on the Louisiana Bar to drive opportunistic lawyers like Morris Bart out of business. I'm not talking about tort reform - which hurts legitimate torts as well as frivolous cases, but use professional pressure to drive these morons out of the state, and legislate the disbursement of insurance monies. Idiots who get $20,000 payouts and drive around in a beaten-up car that's never been touched shouldn't be allowed to get away with it.
Posted by oschrumpf on November 9, 2007 at 12:05 p.m. (Suggest removal)
Amazing how everyone wonders why it seems that more suits are filed in Louisiana but no one seems to notice that Louisiana law requires lawsuits to be filed within one year (often before all the medical treatment is completed) while most other states allow up to two years for claims to be resolved by settlement before suit must be filed. Why do the insurers insist on keeping one year limits in Louisiana? Because a significant number of people do not pursue their claims timely, allowing the insurers to close their files without having to pay claims. Texas has had minimum vehicle liability coverage requirements of $20,000 for years while Louisiana maintains only $10,000 minimum liability coverage, yet a relative of mine incurred increased rates when moving to Louisiana from Texas. Texas allows two years for suits to be settled or suit filed. I wonder if that makes a difference. Same issue in medical malpractice. Two years versus one year. Another thing: insurance companies should be required to make simplified annual reports and the insurance commissioner should be required to make those reports accessible on the web for public viewing. And the reports should, as a minimum, report the annual earned premiums and claims closed with payment, separate from the "losses incurred" which is a mere semantical term for "reserves".
Posted by MrRisky on November 12, 2007 at 2:38 p.m. (Suggest removal)
Agreed on some points, but, note how many suits are filed within 60 days of occurrence. Why ? Judicial Interest is assessed from "date of demand". That is a built in profit center for plaintiff attys.
Posted by llvinbr on February 25, 2008 at 12:23 p.m. (Suggest removal)
Has anyone ever considered the possibility that mandatory insurance generates more claims? If the insurance were not there, many claims would never be filed because there would be little to no chance of recovery. Underwriters will tell you that an insurance company can not make an underwriting profit on a 10/20/10 policy in Louisiana. The money is made on premium financing. The original intent of insurance was to protect one's assets. However, with mandatory insurance, people who can not even afford premiums are in effect being forced to protect assets they do not have.
Rather than have mandatory insurance for people with no assets, those who want to protect assets should have liability, uninsured motorist, med pay, health disability insurance etc. Basically, you create a defacto no fault syster. Therefore fewer claims.
Also, changing the prescriptive period on personal injury claims from 1 year to 2 or 3 would greatly reduce the number of lawsuits. It's just common sense.
Posted by sunshine on February 25, 2008 at 1:48 p.m. (Suggest removal)
I've driven in cities all over this country and I have to say, Louisiana has some of the dumbest drivers in the US. Signals elude most folks and driving in the left hand lane is like a religion (I had one person ask me how I expected them to get anywhere if they couldn't drive in the left-hand lane). *Shutter* It's for passing folks, that doesn't mean your car can't go there, it just means get back to the right lane when you're done passing. This Saturday I got on I-12 at Airline and the guy in front of our line of cars was doing 40. 40! The acceleration lane is so named for a reason, it means you need to join the speed of those cars already on the road... I can't tell you the number of break lights that lit up behind this guy because he wasn't even close to the minimum speed for several miles. Couple that with the sorry excuses for automobiles that some people take to our roads, distracted cell-phone addicts and drunks and there’s no question you’re going to have more injury-producing accidents. We need better mass transit (like light-rail between BR and NOLA and more logical routes around town) and incentives for people to chunk their clunkers and travel by safer more economical means. Folks should have to re-qualify to drive every 10 years and there should be tougher punishments for drunk drivers (instead of plea bargain after plea bargain). Only that and regulation of the providers will keep our insurance money in our pockets.
Posted by brdreamer on February 25, 2008 at 3:54 p.m. (Suggest removal)
Insurance companies need to look at the mirror to find out why we are so "sue happy". I had my car totalled and was injured in an accident caused by another driver several years ago. After putting up with insults and harrassment, I settled about 8 months later. I am anything BUT sue-happy, but I will never put myself through that stress again. If I am misfortunate enough to have this happen again, I'll call a lawyer before I bother with the insurance company. LivinBR has the right idea as well.
Posted by Sueunhappy on August 5, 2008 at 1:39 p.m. (Suggest removal)
Our roads are terrible and driving conditions just as bad. We spend more time testing motorcycle drivers than someone in a car. But once a lawyer is consulted things can only get worse for everyone. They introduce their clients to the joys of turning every ache and pain into mega-bucks. This certainly drives up insurance rates but few of them stop with insurance. Anyone who owns their home or has saved any funds for the future can become a victim of these lawyers just by failing to properly negotiate a crowded and complex intersection. After all, they have to make a PROFIT.
Needless to say there is also the issue of having to buy additional umbrella insurance coverage to protect everything you own from seizure. By the time you add it all up, you (and everyone else) are paying a small fortune for every call to an attorney.
To make matters worse, these lawyers don't have to fear media attention when they do something truly horrible. When was the last time you ever heard a local news story about some poor widow losing her husband and then her home to a plaintiff attorney? With so much ad money coming from these guys, the news media is not looking for human interest stories about the harm they do. Their ads like to leave the impression that this money comes only from big companies. Go ahead, sue the 18 wheeler! Forget that these guys deliver our food and clothing and are barely staying on the road due to gas prices. Again, YOU pay the price. I find the tone and attitude of these lawyers commercials offensive and have begun turning off the programs they support...that includes the local news. No one "deserves" to profit from an accident and I don't want the children in my house subjected to this kind talk.
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