In a recent government meeting, Matthew Byrd from the Gray Insurance Company presented a comprehensive overview of rate-making factors in the insurance industry, particularly focusing on commercial auto insurance in Louisiana. The discussion highlighted the significant role of actuaries in determining insurance rates, emphasizing their responsibility to ensure rates are actuarially justified and adequate to cover losses.

Byrd explained that insurance rates are influenced by various factors, including carrier expenses, loss frequency, and severity. He noted that Louisiana's commercial auto loss costs are substantially higher than those of surrounding states, prompting questions about the underlying reasons for this disparity. The presentation included data showing that Louisiana's loss ratios have averaged above 100% over the past five years, indicating that insurance carriers are not making a profit in the state.

The meeting also touched on the operational challenges faced by insurance companies in Louisiana, with Byrd stating that many carriers rely on business outside the state to offset losses incurred from local commercial auto policies. He pointed out that the rising costs of premiums and losses—both increasing by approximately 95% over the last decade—are directly correlated, with actuaries projecting future rates based on historical data.

Byrd concluded by stressing that any reduction in insurance premiums would require a decrease in either the frequency or severity of claims. He invited legislators to engage further with Gray Insurance for a deeper understanding of these issues, highlighting the importance of informed discussions as they consider potential regulatory changes in the insurance sector.