I had a big decrease/refund in the middle of the pandemic. It only makes sense that as things return to normal that rates should rebound.
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Car Insurance Rates Are
Soaring With Little Relief in
Sight
Jun 24, 2023 09:30AM
Car insurance premiums are rising faster than other inflation-hit
items, such as rent and food.
Photo: David Paul Morris/Bloomberg News
A 40% increase by Allstate in Georgia, a 32% rise sought by
Nationwide Mutual Insurance in California, an 11% bump by State
Farm in New York. Insurers are imposing steep increases on auto
insurance rates, with state regulators doing little to stop them.
Even states with consumer-friendly laws, and the power to veto
increases, are allowing rates to rise. California this year agreed to
more than a billion dollars of car-insurance premium increases,
according to consumer advocates.
Insurers are getting big bumps because they have suffered big
losses. Car insurance premiums could keep increasing through the
end of 2024. “Rates need to rise probably 5 to 10 percent in each
of the next couple of years, because the loss trends have gone up
so much,” said Dale Porfilio, chief insurance officer at industry
group Insurance Information Institute.
Premiums are increasing faster than other inflation-hit items, such
as rent and food. Car-insurance rates increased 17% in the 12
months to May, more than four times the 4% rise in overall
inflation, Labor Department data show.
“Unrestrained rate hikes are hitting the pocketbooks of Americans,
and those least able to pay are seeing the worst burden,” said
Carmen Balber, executive director of consumer group Consumer
Watchdog.
In states such as California and Florida, high auto premium
increases are occurring at the same time that homeowners’
policies are getting more expensive, too.
Auto insurers say their rate requests are driven by necessity, not
greed. The cost of claims has soared since the pandemic, due to
more accidents, higher repair costs, bigger medical bills and
increased litigation. Car insurers last year lost on average 12 cents
for every dollar of premium written, according to S&P Global.
State Farm, the country’s biggest car insurer by premium volume,
lost 28 cents for every dollar written last year, posting a $13
billion underwriting loss for its auto arm.
“It’s probably the worst period for auto insurers it’s been in 30
years at least,” said Neil Alldredge, chief executive of industry
body National Association of Mutual Insurance Companies.
State regulators’ influence over car-insurance rate increases
varies a lot. Their powers range from states such as California,
where increases can take effect only after they are approved, to
Wyoming, where insurers don’t have to notify the state about rate
changes.
New York is one of the toughest policers of car-insurance rate
requests, industry executives say. The state has in the past 12
months agreed to a 6.8% increase for Geico, and 10.6% for State
Farm, after the companies originally requested increases of 11.1%
and 12.5%, respectively, according to S&P Global.
1
The New York Department of Financial Services declined to
comment.
In Florida, another state where regulators have to preapprove any
increases to car-insurance premiums, rates have increased 15%
year-over-year to an average $3,183 for full coverage, according to
personal finance website Bankrate. That makes the Sunshine State
the most expensive in the nation for auto insurance, the Bankrate
study earlier this year found. One reason: big auto insurance
losses from last year’s Hurricane Ian.
The Florida Office of Insurance Regulation is required by state law
to ensure rate increases are “adequate to maintain insurer
solvency and pay claims,” while also preventing excessive pricing,
a spokeswoman said.
A few states are pushing back. North Carolina’s insurance
commissioner has set a fall hearing date to challenge a 28.4%
increase requested by a group representing the state’s auto
insurers. In Georgia, a new law will give the state increased rights
to review rate requests. That follows an increase by Allstate of
more than 40% in its rates last year, which Georgia’s insurance
commissioner said “exploit[ed] a loophole” in the existing rules.
Allstate imposed an increase of more than 40% on car-insurance
rates in Georgia last year.
Photo: Justin Sullivan/Getty Images
An Allstate spokesman referred to a statement from the Insurance
Information Institute, saying “there was no loophole in Georgia,”
and insurers had followed the rules. “Making the regulatory
process of implementing rate increases more burdensome [under
the new law] will make it more difficult for insurers to take on
risk,” the statement added.
Insurers say states that push back too hard can end up hurting
consumers, by causing companies to either pull back or impose
much bigger increases than those initially requested.
California’s insurance commissioner didn’t grant any personal
car-insurance rate increases between March 2020 and last fall.
Under state laws, insurers can’t stop offering new auto policies if
they want to stay in California.
The companies sidestepped that requirement by making it harder
for customers to get policies. Some closed offices or removed their
details from agents’ software. Allstate reported a 37% drop in new
applications in California in the three months through March,
almost double its 22% fall nationwide.
Now that California’s commissioner has started agreeing to
car-insurance increases, some insurers are asking for big
numbers. Nationwide has requested 32.3%, for example. State
Farm has a request for 24.6% pending, having already had a 6.9%
increase approved earlier this year, state records show.
A Nationwide spokesman declined to comment. A State Farm
spokesman said that after sustaining unprecedented underwriting
losses last year, “we continue to adjust…to make sure we are
matching price to risk.”
Denneile Ritter, a vice president at the American Property
Casualty Insurance Association, laid the blame for the double-digit
rate requests in the Golden State at the door of the regulator. The
big rate increases can be traced back to the long hiatus when no
increases were approved, she said.
Michael Soller, California’s deputy insurance commissioner, said it
was the big insurers who in effect put rates on hold, by failing to
request increases until the end of 2021 or even later.
“Our department’s experts have decades of experience in the
insurance industry…but they aren’t mind readers,” Soller added.
“We will not accept blame for situations…when insurance
companies did not step forward.”
Write to Jean Eaglesham at Jean.Eaglesham@wsj.com
