Why Does Louisiana Have the Second-Most Expensive Car Insurance Rates? Part I

If you have shopped for car insurance in Louisiana, you have learned one thing very fast; auto insurance policies in the state are very expensive. In fact, Louisiana ranks as the second-most expensive state in the entire country for auto insurance. One study found that the state ranked only behind Michigan for cost, with Pelican State residents paying 46% higher than the national average for a policy. Because of the cost of policies in the state, many Louisiana drivers break the law and drive without insurance.

Here is a candid look at why insurance costs so much in Louisiana. There are many unfortunate realities for Louisiana drivers. All of these combine to make you pay more for your car insurance policy. 

Judges Often Rule in Favor of Small Claimants in Car Accident Cases

The Louisiana legal system, in part, dictates why policies are more expensive. In Louisiana, you can only request a jury trial if the amount in controversy is over $50,000. Many auto insurance lawsuits are for amounts smaller than that number. Those who cannot request a jury trial can still have their day in court, but a judge will decide the case instead of a jury. Many judges in Louisiana are elected officials, and there is a better chance that they may side with constituents whose votes they need in the next election. The irony is that the reason why you may have a better chance of receiving auto accident compensation is the same reason why you are paying more for your auto insurance policy. 

Insurance Companies Have Negative Impressions of Louisiana

For whatever reason, insurance companies are also suspicious of the state in general. Because insurance is so expensive, many motorists opt for the minimum amount of coverage to operate a vehicle. Insurance companies need to charge enough to make it worth their while to operate in the state. They raise prices on both the minimum policies, and they force other drivers with larger policies to subsidize the costs. Since many drivers do not have insurance and others drive with low coverage, the state, in general, gets a negative stigma. Auto insurance companies set rates to make money. If there is something that they can use to their own advantage, they certainly will. 

You would think that many insurance companies would want to operate in Louisiana because they could charge more. However, it is the other way around. Fewer companies want to do business in Louisiana, so the ones who are in the state get to charge higher premiums. Less competition means that companies have more pricing power. 

Some Insurance Companies Charge Too Much

In some cases, insurance companies are simply overcharging, and people are paying more than they have to for car insurance. In fact, State Farm recently announced that they were cutting rates for some Louisiana drivers. Motorists may simply need to shop around and compare prices more, rather than just accept the first rate that they are offered. 

Stay tuned for Part II of this blog series.