Nola.com: The typical Louisiana driver overpays for car insurance by $1,159 a year, report says

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Drivers in Louisiana already pay some of the highest rates for car insurance in the country. A new report suggests local drivers also lead the country in the amount they overpay for coverage.

Drivers with car insurance policies in Louisiana paid $3,111 a year on average for 12-month coverage in 2018, the highest rate in the nation, according to data analyzed by Gabi, an insurance comparison website and app. Gabi’s analysis looked at premiums paid by more than 130,000 users nationwide, comparing them to average rates in each region for multiple major insurance companies.

To develop the analysis, drivers shared information with Gabi about how much they pay for insurance and basic policy details. Gabi then took that information and compared it to averages for that type of driver and policy, among multiple major insurance companies. The analysis found the average Louisiana driver paid roughly $1,159 more than they could have for car insurance in 2018.

That was more than a third of the total average premium paid by local drivers, and the highest amount overpaid in all 50 states.

Louisiana remains among the most expensive states for car insurance because of a number of factors, including a high rate of uninsured drivers as well as a high rate of auto litigation. Many Louisiana drivers who do buy insurance have minimum coverage. As a result, many turn to the courts to get larger payouts in the case of a serious accident.

Last year, state regulators approved rate hikes for multiple insurers, though there are signs rates may be leveling out. State Farm said in February it would cut auto rates by 3.2 percent this spring. State Farm insures roughly a third of all Louisiana drivers.

State Farm to cut Louisiana auto insurance rates again

Nationwide, a rise in accidents caused by distracted driving, linked to growing smartphone use in vehicles, has led to rising rates. Distracted drivers killed 3,450 people and injured another 391,000 in 2016, according to the latest data from the National Highway Traffic Safety Administration.

In an emailed explanation, Hanno Fichtner, CEO of Gabi, noted a number of factors affect how much an individual pays for car insurance, including one’s credit score and where you live. (Cities have a higher density of drivers and tend to have more accidents reported, thus higher premiums.)

Rates are also lower in states like Maine where there are many different insurance providers and competition is high, Fichtner said. Maine drivers paid an average premium of $1,447 a year in 2018, according to the Gabi analysis. Still, Maine drivers overpaid for insurance, to the tune of about $673 a year, or nearly half the total average 12-month payment.

The one way drivers can consistently lower their auto insurance rate? Shop around, the report says.

Indeed, Louisiana Insurance Commissioner Jim Donelon has repeatedly urged drivers facing a rate hike to shop for a new policy. Insurers in Louisiana get one rate increase or decrease per year. Officials recommend reassessing your coverage options at least once a year.

Here’s a look at the top 10 states where Gabi found drivers overpay for car insurance the most. States are ranked by the total amount overpaid on average.

Insurance Industry: "Credit Scores" Among Reasons for Louisiana's Rising Insurance Costs.

By Ben Riggs • 16 Feb, 2024

Insurance Industry: "Credit Scores" Among Reasons for Louisiana's Rising Insurance Costs. A new report shows that auto insurance rates are skyrocketing, rising by 26% across the U.S. On average, Louisiana drivers pay $2,909 annually, roughly 6.53% of their income for auto insurance. Wayne Watley at Watley Insurance Group lists “credit scores” among the reasons for Louisiana’s rising auto insurance costs, including poor roads and uninsured motorists. Mr. Watley goes on to say, “It’s a challenge because we’re not one of the richest states, but we have some of the highest premiums.” He is correct—and the data backs him up. Insurance companies use credit scores to determine insurance rates for policyholders. Louisiana ranks 48th in median household income and 49th in average credit score . According to a recent study , safe drivers in Louisiana with poor credit pay 111% more than safe drivers with excellent credit ($1,505 / $713). Consequently, Louisiana has the second-highest auto insurance rates in the nation, which leads to more uninsured motorists, another primary cause of higher insurance rates. The use of credit scores in rate setting also creates perverse incentive structures that make Louisiana roads less safe. In Louisiana, safe drivers with poor credit pay an average of $905 more than drivers with a DWI and excellent credit ($3,548 / $2,643). Meanwhile, traffic fatalities increased by 21% from 2019 to 2022 in Louisiana, and the fatality rate per 100 million vehicle miles traveled increased by 18%, according to KPLC . Louisiana desperately needs real insurance reforms that lower costs, protect consumers, hold insurers accountable, and make our roads safer.