Southern States Mean Highest Auto Rates

Four Southern states have some of the least affordable automobile insurance rates in the country, according to a recently published affordability index by the Insurance Research Council (IRC).

The index measures the proportion of household income used to pay for auto insurance. IRC used data from 2018 and 2019, the most recent years for which figures are available.

Louisiana was named the least affordable, with 3.09% of household income going to auto insurance premiums. Florida was next, at 2.61%, and Michigan, Mississippi, and Georgia rounded out the top five of least affordable states. Iowa had the most affordable auto insurance, followed by North Dakota, Hawaii, New Hampshire, and Virginia.

In 2018, median household income in the U.S. was $63,179, and the average auto insurance expenditure was $1,057. On average, U.S. households spent 1.67% of their income on auto insurance.

The IRC said that underlying cost drivers include accident frequency, repair costs, tendency to file injury claims, injury claim severity, medical utilization, attorney involvement, claim abuse, uninsured motorists, and litigation climate.

Louisiana had one of the worst scores in the litigation climate index, followed closely by Florida and Mississippi. Florida also scored the worst in medical utilization and the category known as “fraud and buildup.”

“Although difficult to measure, insurance fraud is a factor in the high cost of insurance in several states,” IRC explained in its report. “Claim abuse can take the form of outright fraud but also includes buildup, which refers to unnecessary or excessive medical treatment or other charges in an otherwise legitimate claim.”

The scoring was based on IRC’s study of closed claims that appeared to involve claim fraud or buildup, the organization noted.

The IRC report echoes others that have consistently found Florida to be one of the most expensive states for automobile insurance.

The Florida Legislature for the past two decades has considered bills that some say would help reduce fraud. Earlier this year, Gov. Ron DeSantis, at the urging of some insurers, vetoed a measure that would have repealed Florida’s requirement that motorists purchase personal injury protection. PIP insurance provides $10,000 of medical, disability and funeral coverage, regardless of who was at fault in an accident. Vehicle owners and operators are immune from tort claims.

The bill, which some reports suggest could be resurrected next spring, would replace PIP with bodily injury coverage and a medical policy. Florida’s Office of Insurance Regulation this summer said that an actuarial analysis showed that the new type of coverage, however, could increase auto premiums by as much as 13%, according to report in Florida Politics.

Mississippi ranked the worst in the nation in the uninsured motorists category, with more than 29% of drivers uncovered in 2019, according to the IRC.

Louisiana has maintained its position as the least affordable state for auto insurance since 2014. Last summer, Louisiana Democratic Gov. John Bel Edwards and the majority-GOP Legislature agreed to a bill that makes it tougher for Louisiana motorists who file car accident lawsuits to win damage awards. Proponents of the law, which went into effect on Jan. 1, 2021, say it will reduce the state’s high insurance premiums by reducing the number of lawsuits filed after accidents and making it harder for those lawsuits to result in lucrative settlements.

IRC found that, nationwide, auto insurance has become more affordable for average Americans over the last three decades. In the 1990s, the median household spent 1.93% of its income on auto insurance compared to 1.71 percent in the 2000s and 1.61% in the 2010s.

IRC is an independent, nonprofit research organization affiliated with The Institutes, a risk management and insurance knowledge solutions provider.

Topics Auto