In recent years, Louisiana has been one of the most expensive states in the country in terms of auto insurance expenditure. While it was ranked 15th most expensive state to buy auto insurance in 1989, it was ranked 3rd most expensive by 2010. Insurance costs in Louisiana showed the second highest rate of growth in the country with a rise of 96.1 percent. Auto insurance costs almost doubled from $572.96 to $1,121.46 from 1989 to 2010. To put that in perspective, there was 43.3 percent rise in the countrywide average figure.
In 1989, average auto insurance costs in Louisiana hovered slightly above the countrywide average. By 2010, auto insurance costs were close to one and a half times the countrywide average. The rise of 96.1 percent is second only to Nebraska’s 108.1 percent, the highest growth rate in the country. Moreover, the National Association of Insurance Commissioners gave Louisiana a Herfindahl–Hirschman Index (HHI) score of 1538 (any score less than 1000 is considered a competitive market; a score between 1000 and 1800 is considered moderately competitive by the Department of Justice). Louisiana’s HHI score is the 3rd worst of all states making it one of the least competitive markets in the country.
A December 2013 study by the Consumer Federation of America found that regulatory systems that allowed the most unregulated activity produced the lease competitive markets. The study also found that states that achieved the greatest success in keeping rates low had strong regulation, such as Prior Approval (PA), in place. A PA system requires insurers to file rates and obtain state approval prior to implementing them in the market. In contrast, Louisiana has File and Use (F&U) system in operation which requires insurers to file rate changes before use without any requirement for approval. States such as California and Hawaii have achieved much success in keeping rates low by implementing stringent insurance regulation including a PA system. Without adequate regulation, Louisiana’s already high insurance expenditure may spiral out of control.