Fighting High Auto Insurance Premiums Will Need a ‘Wholistic’ Approach, Louisiana Legislators Say

Louisianians pay the sixth-highest rates for car insurance, according to Insurify’s auto insurance report. With Insurify projecting a 23% increase by the end of 2024, the news isn’t getting any better.

But state legislators say they’re aware of the problem and have been taking steps to address Louisiana’s escalating car insurance costs. Lawsuits against insurers contribute significantly to the state’s insurance challenges, legislators said at an Oct. 11 meeting of the House Civil Law and Procedure Committee, the Center Square reported.

The claim litigation rate in Louisiana is three times the national average, prompting the American Tort Reform Foundation to name the state to its Judicial Hellholes list. The Foundation also found that legal system abuse in Louisiana costs every resident about $1,100 per year.

The state legislature passed several bills during the 2024 session aimed at stemming legal system abuse, including cracking down on litigation funding from third parties.

These legislative efforts have yet to make a difference in the monthly premiums of Louisiana drivers. But it will take time for the legislature’s efforts to pay off, said Tim Temple, the commissioner of the Louisiana Department of Insurance.

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

How excessive litigation affects rates

Louisiana’s high rate of claim litigation affects everyone’s premiums, lawmakers say.

“Frivolous lawsuits do have an effect on your pocketbook,” Rep. Brian Glorioso said during the House meeting.

“You’re borrowing from yourself,” Temple agreed.

Excessive claim litigation not only increases premiums, but it also drives insurers out of the state, which negatively affects premiums by reducing consumer choice. Additionally, claimants often get smaller payouts than they would’ve with a traditional claim process.

The specter of third-party litigation funding

Intertwined with this conventional claims litigation is third-party litigation funding (TPLF). TPLF occurs when a third-party entity provides financial resources for plaintiffs to file lawsuits and then profits from the litigation. Tracking these third parties down has proven difficult, as most desire anonymity and some reside outside the United States.

The Louisiana Legislature passed Senate Bill 355 in June in an attempt to crack down on litigation funded by foreign third parties by increasing transparency into who is funding these efforts and by setting funding limitations.

What’s next? Increasing awareness

Temple says legislation is just one part of solving the state’s insurance rate crisis. He also wants Louisianans to be more informed.

“I want people to be insurance literate … and understand how insurance works, how claims work, … where dollars go, and how that impacts you,” he said.

Glorioso pitched the idea of a public awareness campaign informing drivers that frivolous lawsuits increase rates for everyone. Other ideas included strategies to lessen the amount of uninsured motorists on Louisiana roads, inviting insurers to be more transparent, and adjusting policy limits.

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

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