Louisiana recently received a “C” grade in insurance regulation from the R Street Institute—its best score in over a decade. Jerry Theodorou, policy director at the Institute, explained that the grade reflects improvements in both policyholder protection and insurer solvency. These two pillars are essential: protecting consumers from fraud and ensuring companies have enough capital and reinsurance to pay claims, especially after major disasters.
Louisiana’s improved grade stems from several reforms. The state has streamlined the process for adjusting insurance rates, allowing for quicker responses to market changes. Additionally, the Louisiana Fortified Homes Program, inspired by Alabama’s similar initiative, has helped homeowners strengthen their properties—especially roofs—to better withstand storms. These mitigation efforts are crucial in a state frequently hit by hurricanes.
Theodorou emphasized that while a “C” isn’t top-tier, it marks significant progress from the state’s previous “D” and “F” ratings. He likened it to a student showing meaningful improvement, which deserves recognition.
To move up to a “B” or higher, Louisiana must continue reforms, particularly in tort law. Excessive litigation and fraudulent claims have burdened insurers, driving up costs. The state is working on tort reform to curb these abuses, following Florida’s successful example. Additionally, increasing competition by licensing more private insurers—ten new ones recently—should help lower premiums.
National policies like FEMA’s Risk Rating 2.0 also affect Louisiana, though they aren’t factored into the R Street grading. These policies aim to align insurance premiums more closely with actual risk, which could impact affordability.
In summary, Louisiana’s insurance landscape is improving through regulatory reform, structural mitigation, and increased market competition. While challenges remain, especially in litigation and affordability, the state is on a promising path toward a more resilient and fair insurance system.