Louisiana auto insurance market faces crisis amid rising costs

In a recent government meeting, Robert Gordon, Senior Vice President of Policy Research and International for the American Property Casualty Insurance Association (APCIA), presented a stark overview of the current state of the auto insurance marketplace, particularly in Louisiana. Gordon highlighted alarming trends in the insurance industry, revealing that personal lines insurers have suffered significant financial losses over the past few years, with the entire personal lines home and auto insurance sector downgraded from stable to negative by AM Best for the first time.

Gordon detailed that the personal auto insurance sector lost over $1.12 for every dollar collected in 2022, leading to a negative return on net worth. He emphasized that Louisiana's auto insurers have faced an average underwriting loss of 7.6% over the past decade, with homeowners insurers experiencing even greater losses. The presentation underscored that the state has the highest market friction due to overregulation, price controls, and legal system abuses, which have contributed to a crisis in insurance availability.

The discussion also touched on the rising costs of vehicle repairs and medical expenses related to auto accidents, which have outpaced insurance rate increases. Gordon pointed out that inflation, particularly in car parts and repair costs, has compounded the financial strain on insurers. He noted that the legal environment in Louisiana exacerbates these issues, with litigation costs significantly higher than the national average, leading to increased insurance rates.

Gordon concluded by urging Louisiana legislators to consider reforms to improve the legal climate, which could help stabilize the insurance market and attract new investments. He expressed optimism that ongoing reforms could eventually lead to a turnaround in the state's insurance landscape, echoing sentiments shared by other stakeholders in the meeting. The discussion highlighted the urgent need for collaborative efforts to address the challenges facing the auto insurance industry in Louisiana.