Reforms put in place in 2024 are a positive move toward repairing Louisiana’s insurance market, which has long suffered from excessive claims litigation and attorney involvement that drive up costs and, ultimately, premium rates.
But more work is needed, Triple-I says in its latest Issues Brief.
Research by the Insurance Research Council (IRC) – like Triple-I, an affiliate of The Institutes – shows Louisiana to be among the least affordable states for both personal auto and homeowners insurance.
In 2022, the average annual personal auto premium expenditure per vehicle in Louisiana was $1,588, which is nearly 40 percent above the national average and nearly double that of the lowest-cost Southern state of North Carolina ($840), IRC said. Louisianans also pay significantly more for homeowners coverage than the rest of the nation, with an average annual expenditure of $2,178, representing 3.81 percent of the median household income in the state – 54 percent above the national average.
Louisiana’s low average personal income relative to the rest of the nation contributes to its personal auto insurance affordability challenges, which are exacerbated by its litigation environment.
Louisiana Insurance Commissioner Tim Temple has championed a series of legislative changes that he has said will encourage insurers to return to Louisiana, especially in hurricane-prone areas.
“There are fewer companies willing to write property insurance in Louisiana, and that’s a lot of what our legislation is designed to do,” Temple said. “To help promote Louisiana and change the marketplace so that companies feel like they are going to be treated fairly.”
In June 2024, Gov. Landry signed into law S.B. 355, which puts limitations on third-party litigation funding – a practice in which investors, with no stake in claims apart from potentially lucrative settlements, fund lawsuits aimed at entities perceived as having deep pockets. Third-party litigation funding drives up claims costs and delays settlements, which end up being passed along to consumers in the form of higher premiums.
This progress was undermined when Landry vetoed H.B. 423, which would have reformed the state’s “collateral source doctrine” that allows civil juries to have access to the “sticker price” of medical bills and the amount actually paid by the insurance company.
“In addition to creating more transparency and helping lower insurance rates, this bill would have brought more fairness and balance to our civil justice system,” said Lana Venable, director of Louisiana Lawsuit Abuse Watch in a statement regarding the veto. “Lawsuit abuse does not discriminate – everyone pays the price when the resulting costs are passed down to all of us.”
Continued reforms in 2025 will be necessary to help prevent legal system abuse and promote a more competitive insurance market that leads to greater affordability for consumers, Triple-I says in its brief.
Maintaining human centricity in an increasingly digitized world was a focus of discussion for many participants at Triple-I’s 2024 Joint Industry Forum (JIF) – particularly during the “Fireside Chat,” featuring Katherine Horowitz, executive vice president and head of business units for The Institutes, and Casey Kempton, president of personal lines at Nationwide.
As generative AI and other technological innovations help streamline the insurance value chain, such processes must continue to align with the human needs intrinsic to insurance, Kempton stressed.
“Insurance is a human business,” Kempton said. “The moment of a claim – of whatever tragedy or inconvenience that has happened – is a human moment. Theres’s emotion involved in that. I don’t expect any robot or machine to take on that experience end-to-end and be able to deliver what folks need in that moment, which is comfort and assurance.”
Rather, new technology presents opportunities to facilitate more proactive and individualized risk management than ever before, while also enabling employees to do what this industry does best: engaging with other people.
Role of telematics
Usage-based insurance, for instance, allows insurers to tailor auto rates based on the policyholder’s driving behavior, tracked by telematics. By providing feedback to encourage safer driving habits, telematics has been found to lower risk and reduce auto premiums, empowering consumers to recognize their direct influence on their insurance rates, Kempton said.
Similarly, advanced smart devices – such as those developed by Whisker Labs (Ting) and Ondo InsurTech (LeakBot) – continuously detect conditions that could lead to damage within a home and notify homeowners before losses occur. The success of these devices has spurred numerous insurance carriers, including Nationwide, to pay for and distribute them to customers.
“Supporting the delivery of these technologies to our customers is critical,” Kempton explained, as is “making the cost of entry accessible.”
Words matter
Kempton noted that mitigative insurance solutions further serve to alleviate widespread public distrust in the industry, which has become “sullied” under misconceptions of insurance as merely a commodity.
Industry language fixated on costs, rather than consumer needs, is partly to blame.
“In insurance, we talk about ‘mitigating loss,’” Kempton said. “That’s how it feels from our perspective – we see claims as losses – but let’s turn that into, ‘how can [insurers] better engender peace of mind and protection for consumers?’”
Louisiana Insurance Commissioner Tim Temple later echoed this sentiment during a panel on legal system abuse, discussing how “billboard attorney” advertising has appropriated the consumer confidence once placed in insurance carriers.
“I remember when insurance companies advertised dependability and stability,” Temple explained. “Now it’s lizards, birds, and jingles… And then you see the attorneys, and they talk about how you’re going to be safe and secure with their service. That’s [the insurance company’s] job.”
Fueled by such advertising, excessive claims-related litigation has cost residents of Louisiana and other states across the country thousands of dollars in “tort taxes” every year, contributing to rising premium rates as insurers struggle to predict and mitigate protracted claims disputes. Lack of transparency around third-party litigation funding (TPLF), in which investors fund lawsuits in exchange for a percentage of any settlement, exacerbates this financial strain.
“If we can avoid these additional expenses and the severity attached to nuclear verdicts, it benefits all consumers,” Kempton said. Recent reforms in Florida – once the poster child for legal system abuse – indicate as much.
But reform necessarily hinges on collaboration between all stakeholders, which is unattainable without resolving “the consumer mindset we’ve inadvertently created around what the value of insurance is,” Kempton said. Updated legal regulations are equally important to ending legal system abuse as reasserting the key values of insurers – to protect and care for policyholders.
From “social inflation” to “tort reform” to, simply, “fraud,” settling upon uniform terminology to describe litigation trends that drive up costs – including insurance premiums – for all Americans is a primary challenge to addressing them, according to participants at Triple-I’s 2024 Joint Industry Forum.
“As we’re trying to raise awareness of this problem with consumers, ‘social inflation’ doesn’t work,” said discussion moderator and Triple-I’s Chief Insurance Officer Dale Porfilio. Though Triple-I previously favored “social inflation,” consumer testing was done that suggested a better name was needed. “That’s when we landed on ‘legal system abuse.’”
“The name absolutely matters,” said Viji Rangaswami, senior vice president and chief public affairs officer for Liberty Mutual. “When you talk to a legislator, whether that’s in Kansas or in Washington, D.C., and you say the words, ‘social inflation,’ they don’t know what you’re talking about. But when you say the words ‘legal system abuse,’ you see the lightbulb go off.”
Louisiana Insurance Commissioner Tim Temple – a self-described “unicorn” among insurance regulators, given his decades-long background in the industry as an agent, broker, and company president – even renamed programs to address “legal system abuse” when he assumed office in January. This shift exemplifies Temple’s commitment to using his experience to shape a regulatory and statutory environment that enhances the attractiveness of Louisiana’s insurance market.
“We’re getting more buy-in now, people understand it,” Temple said. “That’s part of transparency – talking about what it truly is.”
Clear communication is key
Opaque, ill-defined language empowers predatory “billboard attorneys” to define these terms themselves, contributing to pervasive policyholder distrust, said Jeff Sauls, Farmers Insurance head of legislative affairs.
“There’s this perception of the insurance industry amongst the public – and plaintiffs’ attorneys help portray this – as a high-margin business,” he said, when, in reality, “we compete with grocery stores for who can make less money in an average year.”
Attorney advertising – estimated to total over $2.4 billion across the U.S. last year – has commandeered the messaging once associated with insurers, noted Temple, who encouraged the industry to “take back that high ground” of providing “dependability and stability during the worst days of people’s lives” without overuse of brand mascots or jingles.
“We have to remind the public why we exist,” Rangaswami added. “We want to pay claims as expeditiously as possible…. We’re on the side of the consumer, whereas the plaintiffs’ attorney is often on their own side or the investor’s side.”
Third-party litigation funding
With her reference to “investors,” Rangaswami took aim at a little-known, rapidly growing practice called third-party litigation funding (TPLF), in which investors with no stake beyond potential profit step in to fund lawsuits against corporate entities perceived as having deep pockets. As of last year, such investors retained an estimated $15.2 billion in assets for U.S. litigation alone.
Only a handful of states require mandatory disclosure of TPLF, which enables hedge funds and other foreign funders to compound and profit from protracted and even fraudulent U.S. court cases. Secrecy surrounding TPLF prevents insurers and regulators from identifying, let alone mitigating, the risks of increased costs and time to resolve claims disputes.
Preventing adversaries to the U.S. from exploiting TPLF to influence settlement outcomes and access sensitive defense information is another concern.
“We’re looking at TPLF as potentially exacerbating national security risk,” said Jerry Theodorou, policy director for finance, insurance, and trade at the R Street Institute. “Most people don’t know what TPLF is and the way it can insidiously impact the economy, our businesses, our jobs.”
Everyone is affected
Legal system abuse costs the highly litigious states Louisiana and Georgia over 175,000 jobs combined and thousand-dollar “tort taxes” for each resident per year, earning both states recurring spots on the American Tort Reform Foundation’s list of “Judicial Hellholes.” They also rank among the least affordable places for auto and homeowners’ insurance by the Insurance Research Council – an affiliate of The Institutes, like Triple-I.
Louisiana recently enacted a law enforcing some oversight over TPLF, Temple noted, as well as repealed a unique “three-year rule” that impeded actuarially-sound underwriting. But as the state’s bodily injury claims climb well over the national average, more reform is needed to return insurance profitability to the state.
“One thing I would look to is importing some of the good things Florida has done,” Theodorou suggested, explaining that reform curtailing contingency and one-way attorneys’ fees “have brought down the number of lawsuits against insurance companies by 24 percent” for the second consecutive three-quarter period. “Notice of intention to sue is also down by double digits. It’s working, so let’s learn from that.”
Considering the fact that the former “poster child” for legal system abuse generated over 70 percent of all homeowners insurance litigation nationally in 2022 – despite accounting for only about 15 percent of total homeowners claims – Florida’s reduced premium growth and nine new property insurers this year reveal the likely efficacy of such reforms in other states.
Education and coalition building
But such reform requires advocacy, which requires consumer education and coalition building across diverse stakeholder groups, Rangaswami pointed out.
Fixing “an economy-wide problem,” she explained, requires an “economy-wide coalition.”
The end goal is not a “tilted playing field,” Sauls emphasized. “We’re trying to get to a place where we are all on level footing, without being exploited by plaintiffs’ attorneys.”
Legal system abuse “is going to be a pressure point for the industry moving forward,” stressed Fred Karlinsky, shareholder and global chair of Greenberg Traurig, LLP. “No state is immune from what we’ve seen in Florida.”
Karlinsky emphasized that spreading normalization of “nuclear” (over $10 million) and an emergent class of “thermonuclear” (over $100 million) verdicts will stall reform in newly targeted states.
Rangaswami pointed out that not all the news has been bad.
“We had some great wins in 2024,” she said, citing Florida’s improved insurance market and legislation introduced at both the federal and state levels as movement in a promising direction. “But we have to keep this momentum up.”
By William Nibbelin, Senior Research Actuary, Triple-I
Insurance is priced to reflect the underlying risk of every policy. When more claims are filed and the average amount paid of those claims increases, insurance becomes more expensive. A measure of underwriting profitability for insurance carriers is the combined ratio calculated as losses and expense divided by earned premium plus operating expenses divided by written premium. A combined ratio over 100 represents an underwriting loss. When expected losses increase, an insurance carrier must increase premiums by raising rates to maintain a combined ratio under 100.
Commercial auto insurance has recorded a net combined ratio over 100 nine times out of 10 between 2014 and 2023, and, according to the latest forecasting report by Triple-I and Milliman, continues to worsen in 2024. According to the Triple-I Issues Brief, personal auto insurance has had a net combined ratio over 100 for the past three years, with a 2023 net written premium (NWP) growth of 14.3 percent, which was the highest in over 15 years.
From 2014 through 2023 economic and social inflation added $118.9 billion to $137.2 billion in auto liability losses and defense and cost containment (DCC) expenses. This represents 9.9 percent to 11.5 percent of the $1.2 trillion in net losses and DCC for the period and an increase of 24 percent to 31 percent from the previous analysis on years 2013 through 2022.
A new study – “Increasing Inflation on Auto Liability Insurance – Impact as of Year-end 2023” – is the fourth installment of research on the impact of economic and social inflation on insurer costs and claim payouts. Compared to the prior study, Commercial Auto Liability loss and DCC is 20.7 percent to 27.0 percent ($43 billion to $56 billion) higher due to increasing inflation. Personal auto liability loss and DCC is 7.7 percent to 8.2 percent ($76 billion to $81 billion) higher from increasing inflation.
Key Takeaways
The compound annual impact of increasing inflation ranges from 2.2 percent to 2.9 percent for commercial auto liability, which is higher than the personal auto liability estimate of 0.7 percent. However, the impact of increasing inflation from a dollar perspective is much higher for personal auto liability compared to commercial auto liability. This is due, in part, to the underlying size of the line of business.
Frequency of auto liability claims per $100 million GDP for 2023 is unchanged for commercial auto liability and lower for personal auto liability compared to 2020, when frequency dropped at the onset of the COVID-19 pandemic for both lines.
Severity of auto liability claims continues to increase year over year and has increased more than 70 percent from 2014 to 2023 for both lines.
Researchers Jim Lynch, FCAS, MAAA, Dave Moore, FCAS, MAAA, LLC, Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer, and William Nibbelin, Triple-I’s senior research actuary used a similar methodology as prior studies. Loss development patterns were used to identify inflation for selected property/casualty lines in excess of inflation in the overall economy. The new study extends the model with annual statement data through year-end 2023.
Commercial Auto Liability
The prior study indicated claim severity (size of losses) had risen 72 percent overall from 2013 to 2022, with the median annual increase at 6.3 percent. The new study indicates an additional annual increase of 6.6 percent from 2022 to 2023. The report compares the compound annual growth rate of 6.6 percent from 2014 through 2023 to the compound annual increase in the consumer price index (CPI) of 2.8 percent during this same time. With a flat frequency trend combined with an increasing severity trend in recent years for commercial auto liability, this comparison calls out the higher inflation faced by insurers beyond just general inflation trends.
Personal Auto Liability
While replacement costs remain flat to negative providing relief to personal auto physical damage, personal auto liability represents approximately 60 percent of the overall personal auto line. Similar to commercial auto liability – but slightly lower – claim severity for personal auto liability has increased at a compound annual rate of 6.3 percent from 2014 through 2023. However, unlike commercial auto liability, the frequency for personal auto liability has declined slightly in 2022 and 2023, with 85 claims per $100 million GDP in 2023 compared to 90 in 2022 and 100 in 2021.
Limitation of industry data
The report relies on industry data as reported by insurers to the National Association of Insurance Carriers (NAIC) and made available through different reporting suppliers, such as S&P Global Market Intelligence. As such, different individual inflationary elements – whether economic, social, or otherwise – cannot be determined using the underlying actuarial methodologies.
However, like prior studies the bulk of increasing inflation before 2020 is attributed to social inflation, while social inflation and economic inflation dominate increasing inflation together beginning in 2020.
Triple-I continues to foster a research-based conversation around social inflation as part of legal system abuse. For an overview of the topic and other helpful resources about its potential impact on insurers, policyholders, and the economy, check out our knowledge hub.
The commercial auto insurance line has struggled to achieve underwriting profitability for years, even before the inflationary conditions that have been affecting property/casualty lines more recently. This trend has been accompanied by steady growth in net written premiums (NWP).
This weakness in underwriting profitability has been driven by several causes, according to a new Triple-I Issues Brief. One is the fact that vehicles – both commercial vehicles and personal vehicles they collide with – have become increasingly expensive to repair, thanks to new materials and increased reliance on sensors and computer systems designed to make driving more comfortable and safer. This well-established trend has been exacerbated by supply-chain disruptions during COVID-19 and continuing inflation in the pandemic’s aftermath.
Distracted driving and litigation trends also have played a role.
However, Triple-I sees some light on the horizon for commercial auto in terms of the line’s net combined ratio – a standard measure of underwriting profitability calculated by dividing the sum of claim-related losses and expenses by earned premium. A ratio under 100 indicates a profit and one above 100 indicates a loss.
As the chart below shows, the estimated 2024 net combined ratio for commercial auto insurance has improved slightly since 2023, and further improvement is expected over the next two years.
These projected improvements are based on an expectation of continued premium growth – due more to aggressive premium rate increase than to increased exposure – as the rate of insured losses levels off.
Despite strong income growth that has helped improve personal auto insurance affordability in Louisiana, the state remains the least affordable among its Southern neighbors and the rest of the United States, according to the Insurance Research Council (IRC).
In 2022, the average annual premium expenditure per vehicle for auto insurance in Louisiana was $1,588, which is nearly 40 percent above the national average and nearly double that of the lowest-cost Southern state of North Carolina ($840), the IRC report says. Louisiana’s spending accounted for 2.67 percent of the median household income in the state.
Florida’s average annual premium expenditures, at $1,625, exceed Louisiana’s, but the state is slightly more affordable; Florida’s higher median income results in a lower expenditure share of income (2.49 percent). The Sunshine State is not included in the IRC report because it is the only no-fault jurisdiction among the Southern states, a fact that skews some comparisons.
All the Southern states had median household income below the overall U.S. figure, contributing to affordability challenges in the region as a whole. This was especially true for Mississippi, where the median income was 35 percent below the U.S. median.
In addition to low average household incomes, Louisiana’s affordability issues stem from such cost drivers as a higher tendency to file injury claims when an accident occurs, a high rate of underinsured motorists, and a high rate of claim litigation. Previous IRC claim research has pointed to high rates of attorney involvement in auto injury claims in the state.
In addition, Louisiana received the second-lowest score in a 2019 survey of businesses regarding the fairness of states’ litigation landscapes conducted by the U.S. Chamber of Commerce. It also is a perennial member of the “Judicial Hellholes” list published by the American Tort Reform Association (ATRA).
IRC – like Triple-I – is an affiliate of The Institutes.
The U.S. property and casualty insurance industry experienced better-than-expected economic and underwriting results in the first half of 2024, according to the latest forecasting report by Triple-I and Milliman. The report was released during a members-only webinar on Oct. 10.
The industry’s estimated net combined ratio of 99.4 represented a 2.3-points year-over-year improvement, with commercial lines continuing to outperform personal lines. Combined ratio is a standard measure of underwriting profitability, in which a result below 100 represents a profit and one above 100 represents a loss.
Much of the overall underwriting gain was due to growth in personal lines net premiums written. Commercial lines underwriting profitability remained mostly flat.
“The ongoing performance gap between personal and commercial lines remains, but that gap is closing,” said Triple-I Chief Insurance Officer Dale Porfilio. “The significant rate increases necessary to offset inflationary pressures on losses are driving the improved results in personal auto and homeowners. With that said, the impact of natural catastrophes such as Hurricanes Helene and Milton threaten the improved homeowners results and are a significant source of uncertainty.”
During the webinar Q&A period, Porfilio provided insight on the potential impact of Hurricane Milton on the Triple-I 2024 net combined ratio forecast during the Q&A portion. One key figure regarding potential catastrophe losses is the impact on the 2024 net combined ratio forecast of adding one additional billion dollars of catastrophe losses. Each additional billion dollars of catastrophe losses is an impact of one tenth of a percent on the forecast.
Triple-I has loaded an estimate for catastrophe losses for the second half of 2024 based on historical experience, trends, economic projections, etc. prior to Milton, so there is no expectation of needing to add $30 billion to $40 billion – the recent estimate published by Gallagher Re.
If there was a need to add an additional $30 billion in catastrophe losses, that would be a +3.0-point impact on the forecast.
The net combined ratio for homeowners insurance of 104.9 was a six-point improvement over first-half 2023. The line is expected to achieve underwriting profitability in 2026, with continued double-digit growth in net written premiums expected in 2025.
Personal auto’s net combined ratio of 100 is 4.9 points better than 2023. The line’s 2024 net written premium growth rate of 14.5 percent is the highest in over 15 years.
Jason B. Kurtz – a principal and consulting actuary at Milliman – elaborated on profitability concerns within commercial lines. Commercial lines 2024 net combined ratio remained relatively flat at 97.1 percent. Improvements in commercial property, commercial multi-peril, and workers compensation were offset by continued deterioration in commercial auto and general liability.
“Commercial auto expectations are worsening and continue to remain unprofitable through at least 2026,” he said. “General liability has worsened and is expected to be unprofitable through 2026.”
Michel Léonard, Triple-I’s chief economist and data scientist, said P&C replacement costs are expected to overtake overall inflation in 2025.
“P&C carriers benefited from a ‘grace period’ over a few quarters during which replacement costs were increasing at a slower pace than overall inflation,” Dr. Léonard said. “That won’t be the case in 2025.”
It’s not too late to register for Triple-I’s Joint Industry Forum: Solutions for a New Age of Risk. Join us in Miami, Nov. 19 and 20.
The Casualty Actuarial Society (CAS) has added to its growing body of research to help actuaries detect and address potential bias in property/casualty insurance pricing with four new reports. The latest reports explore different aspects of unintentional bias and offer forward-looking solutions.
The first – “A Practical Guide to Navigating Fairness in Insurance Pricing” – addresses regulatory concerns about how the industry’s increased use of models, machine learning, and artificial intelligence (AI) may contribute to or amplify unfair discrimination. It provides actuaries with information and tools to proactively consider fairness in their modeling process and navigate this new regulatory landscape.
The second new paper — “Regulatory Perspectives on Algorithmic Bias and Unfair Discrimination” – presents the findings of a survey of state insurance commissioners that was designed to better understand their concerns about discrimination. The survey found that, of the 10 insurance departments that responded, most are concerned about the issue but few are actively investigating it. Most said they believe the burden should be on the insurers to detect and test their models for potential algorithmic bias.
The third paper – “Balancing Risk Assessment and Social Fairness: An Auto Telematics Case Study” – explores the possibility of using telematics and usage-based insurance technologies to reduce dependence on sensitive information when pricing insurance. Actuaries commonly rely on demographic factors, such as age and gender, when deciding insurance premiums. However, some people regard that approach as an unfair use of personal information. The CAS analysis found that telematics variables –such as miles driven, hard braking, hard acceleration, and days of the week driven – significantly reduce the need to include age, sex, and marital status in the claim frequency and severity models.
Finally, the fourth paper – “Comparison of Regulatory Framework for Non-Discriminatory AI Usage in Insurance” – provides an overview of the evolving regulatory landscape for the use of AI in the insurance industry across the United States, the European Union, China, and Canada. The paper compares regulatory approaches in those jurisdictions, emphasizing the importance of transparency, traceability, governance, risk management, testing, documentation, and accountability to ensure non-discriminatory AI use. It underscores the necessity for actuaries to stay informed about these regulatory trends to comply with regulations and manage risks effectively in their professional practice.
There is no place for unfair discrimination in today’s insurance marketplace. In addition to being fundamentally unfair, to discriminate on the basis of race, religion, ethnicity, sexual orientation – or any factor that doesn’t directly affect the risk being insured – would simply be bad business in today’s diverse society. Algorithms and AI hold great promise for ensuring equitable risk-based pricing, and insurers and actuaries are uniquely positioned to lead the public conversation to help ensure these tools don’t introduce or amplify biases.
Louisiana’s personal auto insurance affordability improved to 2.67 percent of median household income in 2022 – down from 2.93 percent in 2020 – but it retains the dubious distinction of being the least affordable state, Triple-I’s chief insurance officer told the Louisiana House Insurance Committee in recent testimony.
Dale Porfilio – who also is president of the Insurance Research Council (IRC) – said that by nearly every metric the state’s insurance cost drivers are well above the national average:
Accident frequency – Louisiana is 16 percent higher than the national average;
Repair cost severity – Louisiana is 9 percent higher;
Injury claim relative frequency – Two out of every four property damage claims (when cars hit cars) in Louisiana result in bodily injury claims (49 percent), twice the one out of every four (25 percent) across all states;
Medical utilization – Louisiana is 47 percent higher;
Attorney involvement – Louisiana is 24 percent higher;
Underinsured motorists – At-fault drivers in Louisiana have insufficient liability insurance limits in over 35 percent of multi-car accidents, over twice the 16 percent U.S. average; and
Claims litigation – Litigation over personal auto claims in Louisiana is more than twice the national average, surpassed only by Florida.
Porfilio noted that for auto insurance affordability to improve, overall expected losses will need to be reduced. Legislation to reduce one or more of these key cost drivers would be helpful, Porfilio said.
As Triple-I and IRC previously reported, the combination of high insurance expenditures and low median income make Louisiana a difficult state in which to lower costs. The frequency of hurricanes hitting the state increases homeowners insurance costs, and the high cost of reinsurance has contributed to the Louisiana’s insurance woes.
In fact, in 2020 and 2021, in the wake of Hurricane Laura and Hurricane Ida, insurers paid out more than $23 billion in insured losses from over 800,000 claims filed.
While Louisiana policymakers were confident a $45 million fund approved in February 2023 to encourage insurers to write property insurance business in the state would help stabilize the market, insurance commissioner Jim Donelon recognized that the approved grants are only the first step toward reducing homeowners’ insurance rates.
As Porfilio’s testimony demonstrated – and the market has dictated – more work is needed to lower costs for consumers and insurers in Louisiana.
Georgia’s personal auto insurance affordability has significantly worsened over the past decade and a half, making it one of the least affordable states, according to a new report by the Insurance Research Council (IRC) – a division of The Institutes, like Triple-I.
The study, Personal Auto Insurance Affordability in Georgia, ranks the state 47th in terms of auto insurance affordability. Only four other states – Louisiana, Florida, Mississippi, and New York – are less affordable. In 2006, Georgia was the 27th most affordable state.
Personal auto insurance expenditures in Georgia accounted for two percent of the median household income in 2022 (the latest year for which expenditure data is available). This is compared with 1.5 percent nationally.
Key findings:
From the mid-2000s through 2014, Georgians spent about the same on auto insurance as other Americans. In the mid-2010s, however, auto insurance expenditures in Georgia began escalating. Between 2014 and 2022, auto insurance spending in Georgia grew 5.6 percent annualized, compared with 3.3 percent in the country overall and faster than in any other state. In 2022, Georgia’s average expenditure of $1,347 was 20 percent higher than the U.S. average.
Affordability issues in Georgia’s auto insurance market stem from multiple factors — many of which have been faced by the rest of the country — including economic inflation, rising replacement costs, risky driving behavior, and legal system abuse. However, several key cost drivers are higher in Georgia, including propensity to file injury claims, number of underinsured motorists, and claim litigation.
Auto insurance litigation is a growing concern in Georgia, especially as tort reform in neighboring states may be pushing law firms in those states to seek opportunities elsewhere. Georgia has experienced elevated attorney advertising rates, particularly in television advertising.
“Uninsured and underinsured motorists are both a symptom and a cause of affordability issues,” said Dale Porfilio, FCAS, MAAA, president of the IRC. “When affordability deteriorates, whether from increasing costs or slower income growth, increasing numbers of motorists may choose to lower the policy limits or to forgo the mandated insurance completely.”
Porfilio, who is also Chief Insurance Officer of Triple-I, noted that the resulting need for drivers to purchase uninsured motorist (UM) and underinsured motorist (UIM) protection further increases average insurance expenditures.
“Both the UM and UIM rates are higher than average in Georgia,” he said. “The UIM rate is especially high in the state: Georgia’s UIM rate has been increasing steadily and was the third-highest rate in the country in 2022.”
