Auto insurers ask for higher rates in Q4 2021, 2022

Auto insurers are pushing for rate increases or planning to do so, as claims costs rise due to collisions, repairs and extreme weather conditions, companies, industry experts and rate claims say States.

Key points to remember

  • Insurers like Travelers and Allstate file or plan to file personal auto rate increase request for the fourth quarter of 2021 until next year
  • Rate hikes are largely single-digit, though companies say they should be higher to reflect losses
  • Factors contributing to higher losses requiring higher premiums include the environment, reckless driving, supply chain disruption
  • Areas of coverage for which the need for premiums is highest include bold injuries and uninsured motorists
  • All companies see their claims on the rise, according to industry expert

40-state plan for rate hikes

In a call to investors to discuss earnings on October 19, The Travelers Cos. announced it would file rate hikes in about 40 states through mid-2022, with higher rates in place by year-end. Michael Klein, The president of Travelers’ personal insurance said on the call that there were higher levels of losses from Hurricane Ida, coupled with the fact that the frequency of claims “was effectively returning to pre-levels. the pandemic “. Hurricane and tropical storm in September caused flooding of possibly 212,000 vehicles according to CARFAX. That does not include the 378,000 flood damaged cars that CARFAX data shows were already on the road in 2021, he said.

In a research note, stock analysts at Evercore ISI expressed surprise during Travelers’ presentation, noting that personal automobile frequency has returned to pre-pandemic levels as kilometers driven are still falling. from 2019 levels, but said Travelers appeared confident their increases would be approved. by state regulators.

Increasing frequency and severity

The severity and frequency of auto claims determine the rates charged or set by auto insurers in states.

In recent government reviewed filings, companies indicate they need higher rates because of larger losses in coverage areas. from daring injuries, collisions and uninsured motorists. But every company reports higher claims, says Brian Sullivan, editor, Risk Information Inc., publisher of the Auto Insurance Report..

For example, Allstate Fire and Casualty Insurance Co. filed a document Oct. 19 with Texas regulators stating that an 8.5% overall increase for private passenger car policyholders in Texas was indicated, with an expected maximum impact of 23 , 1%.

However, the insurer said that a larger overall increase of 35.5% was in fact the amount needed to reflect the expected losses; some regulators and state insurers do not want to raise rates too high compared to current premiums, in order to avoid financial disruption to consumers.

Claims for bodily injury, uninsured motorists and property damage increase

Personal injury, the costs of covering uninsured motorists and the costs of property damage weighed heavily on the need for higher rates, according to the insurer’s Oct. 19 filing, a theme repeated in the files of other insurers. .

“After experiencing over a year of limited contact and economic activity, we have started to see a return to driving activity and losses that are approaching pre-pandemic loss levels and trends. Over the past few months, we’ve seen a rapid return to normal driving habits as vaccination levels have risen and infection rates have declined, ”Allstate told Rhode Island regulators in a recent filing. . At the same time, other Allstate affiliates filed a request for rate increases in Texas. with rate increases indicated and actually needed in single digits.

The severity increases that started to increase in the second half of 2020 for most auto coverage “haven’t been moderated yet,” Allstate wrote.

No October surprise

Other insurers are also asking or filing rate hikes in other states.

  • Geico earlier this month filed an 8.3% overall rate hike in Maryland, citing higher indications of personal injury and uninsured motorist coverage.
  • Old Dominion Insurance Co. proposed an overall rate change of 6% before and after rate stabilization, although an overall rate increase of 9.4% was indicated, he said.
  • Shelter Mutual Insurance Co. filed in Louisiana, already the most expensive state for auto insurance, indicating that an 18.8% rate hike was indicated for losses, which were greatest in personal injury, in uninsured motorists and in full coverage.
  • Safe Auto Insurance Co. filed a 5% premium increase for private passenger auto coverage in Ohio, starting this fall.

While few insurers have disclosed their planned rate increases, State Farm spokesman Justin Tomczak notes that while State Farm is unable to speculate on future rate adjustments, its rates remain lower than pre-Covid-19 levels even though the kilometers driven and the volume of complaints increased.

No relief in sight

The frequency of auto accident and other loss claims declined during the pandemic, and auto insurers actually refunded premiums to customers. This insurance relief typically reduced premiums by 15% to 25% for one or more months in the spring of 2020, according to the National Association of Insurance Commissioners, resulting in $ 10.5 billion in refunds, discounts, dividends, a he said, crediting the insurance information. Institute. California’s main insurance regulator has since demanded more refunds.

Risky business

However, as the roads opened up, people drove much faster, resulting in larger crashes and therefore more serious claims, according to industry publisher Sullivan.

Gravity has been increasing for several years now as cars become more complex and expensive to repair, he adds.

The speeding behavior remained even as the miles traveled increased, Sullivan says.

“It’s become a habit. When you mix higher speeds with increasingly congested roads, you can see more accidents,” Sullivan said.

More than anything else, speed affects the severity of a crash, and the trends for 2020 are not encouraging on that front, according to industry experts. They point out that speeding tickets are on the rise on national roads, associated with more distracted driving and impaired driving, especially from cannabis and alcohol.

Supply chain issues lead to longer repairs, rental delays

According to experts, Loretta Worters, spokesperson for the Insurance Information Institute, says the problems are driving up the cost of auto parts, including the microchips needed for the technological features of the cars.


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