Louisiana addresses high auto insurance rates with legislative efforts

Louisiana residents face some of the highest car insurance rates in the United States, ranking sixth according to Insurify’s auto insurance report. With an anticipated 23% increase by the end of 2024, state legislators are addressing this issue.

During a meeting on October 11 with the House Civil Law and Procedure Committee, lawmakers highlighted that lawsuits against insurers significantly contribute to rising costs. The claim litigation rate in Louisiana is three times higher than the national average, leading the American Tort Reform Foundation to include Louisiana on its Judicial Hellholes list. The foundation estimates legal system abuse costs each resident approximately $1,100 annually.

In response, several bills were passed during the 2024 legislative session aimed at reducing legal system abuse, including measures against third-party litigation funding. However, these efforts have not yet resulted in lower premiums for drivers. Tim Temple, commissioner of the Louisiana Department of Insurance, stated that while everyone seeks immediate solutions due to financial stress, changes will take time.

“Everyone is facing financial stress today,” Temple noted. “They want solutions today. The unfortunate scenario is that that’s not going to happen today.”

Lawmakers argue that excessive claim litigation affects premiums and drives insurers out of Louisiana, reducing consumer choice and resulting in smaller payouts for claimants compared to traditional processes.

Rep. Brian Glorioso remarked during the meeting: “Frivolous lawsuits do have an effect on your pocketbook.” Temple added: “You’re borrowing from yourself.”

The issue of third-party litigation funding (TPLF) also complicates matters. TPLF involves external entities financing plaintiffs' lawsuits for profit. Senate Bill 355 was passed in June to increase transparency regarding these funders and set limitations.

Temple emphasizes that legislation alone won't resolve high insurance rates; public awareness is crucial too.

“I want people to be insurance literate … and understand how insurance works," he said.

Glorioso suggested a public campaign about how frivolous lawsuits raise rates for all drivers and proposed strategies like reducing uninsured motorists and increasing insurer transparency as part of a comprehensive solution.

“Whatever solutions we look at, it has to be a wholistic approach,” Temple concluded.