A new study by Quadrant Information Services, performed for Insure.com, has crowned Michigan as the state whose residents pay the most for their insurance. Michigan took the lead this year from Louisiana, who led the country in being the most expensive insurance state last year.
New figures show Louisiana’s premiums averaging $2,453 per year with Michigan slightly higher with an average of $2,541 per premium. The cost of motor insurance premiums in Louisiana is an interesting case study in exactly what drives premiums through the roof state-wide. In the case of the Pelican state, it seems to be a little bit of everything.
The commonly cited causes for higher-than-average insurance premiums include average number of accidents per year in the state, the condition of the state’s roads and how many ‘high accident zones’ it has, the number of uninsured or underinsured drivers and the average condition of the vehicles on the road.
However, one thing that complicates the insurance situation in Louisiana is a state law that requires all claims under $50,000 to be settled by an elected judge, and not a full jury. This is because Louisiana is a “lawsuit-happy state” says the report, and the law is designed to discourage frivolous lawsuits.
Law Makes Insurance More Expensive
Unfortunately, the net effect of this law is that most insurance claim disputes only go before a judge, not a jury, and judges tend to side with individual insurance payers rather than large insurance companies. This means that insurance companies know that they are more likely to lose disputes, and so charge higher insurance premiums to compensate for these projected losses.
However, Opelousas Mayor Don Cravins Sr., who owns an insurance company, disagrees that the state law is the sole and/or majority reason for high premiums in Louisiana.
“Although that state law is a very minor reason why insurance rates in Louisiana are so high, there are many more factors that are contributing to the high rates. You can blame the insurance companies, the medical profession, legal profession, issues of roads in Louisiana, significant number of fraud claims and the high percentage of people driving without insurance that forces people with insurance to purchase uninsured/underinsured motorists for their policy.”
He says that all of these factors weigh into the issue more, but the numbers disagree. According to an Insurance Research Council analysis, 13 percent of Louisiana drivers are uninsured, the same as Nevada, Minnesota and Alaska. There are 21 states with 15 percent or higher drivers without insurance, including Mississippi.
Time To Review The Situation
Louisiana State Rep. Ricky Hardy says that it’s time for the House of Representatives to have a look at the findings of the report and see if there’s anything that can be done about it. One thing that will immediately help to remedy the situation is reducing the number of uninsured drivers, but doing so requires reducing premiums first.
Because of this, Hardy says he is going to have a look into the law that only allows jury trials for claims over $50,000, and see if that figure could be reduced. This could potentially decrease the price of premiums enough so that a larger portion of uninsured drivers could purchase liability cover.