Auto insurers filing for higher rates for fourth quarter, 2022

Travelers plans to raise rates in 40 states, citing higher claims costs

Auto insurers are filing for rate increases or plan to, as claim costs increase from collisions, repairs and from severe weather, according to companies, industry experts and state rate filings. 

Key Takeaways

  • Insurers like Travelers and Allstate are filing or planning to file for personal auto rate increases in the fourth quarter 2021 through next year
  • Rate increases are largely in the single digits, although companies are indicating they should be higher to reflect losses
  • Factors contributing to higher losses requiring higher premiums include environment, reckless driving, supply chain disruption
  • Coverage areas seeing higher need for premium boosts include boldly injury and uninsured motorists
  • All companies are seeing claim increases, industry expert says

40-state plan for rate hikes 

In a call with investors to discuss earnings Oct. 19, The Travelers Cos. announced it would be filing rate hikes in about 40 states through mid-year 2022, with higher rates in place by year-end. Michael Klein, president, personal insurance, for Travelers stated on the call that there were higher loss levels from Hurricane Ida coupled with the fact that claim frequency was “effectively returning to pre-pandemic levels.” The September hurricane and tropical storm resulted in the flooding of perhaps 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, it stated.

In a research note, equity analysts at Evercore ISI expressed surprise at Travelers presentation noting that personal auto frequency was back at pre-pandemic levels given that miles driven are still down from 2019 levels but said it through Travelers sounded confident it would get its increases approved by state regulators.

Frequency and severity rising 

The severity and frequency of auto incident claims determines the rates requested or set by auto insurers in states. 

In recent state filings reviewed, companies are indicating they need higher rates due to greater losses in the coverage areas of boldly injury, collisions and uninsured motorists. But every company is reporting 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 an 8.5% overall increase for private passenger auto policyholders in Texas was indicated, with a maximum expected impact of 23.1%. 

However, the insurer said that a larger 35.5% overall increase was actually the amount needed to reflect expected losses; some state regulators and insurers don’t want to hike rates too high from current premiums, to avoid disrupting consumers financially. 

Bodily injury, uninsured motorist and property damage claims rise 

Bodily injury, uninsured motorist coverage costs and property damage costs weighed heavily on the need for higher rates, according to the insurer’s Oct. 19 filing, a theme repeated in other insurers’ filings.

“After experiencing more than a year of limited contact and economic activity, we have begun to see a return to driving activity and losses that are approaching pre-pandemic loss levels and trends. In recent months, we have seen a rapid return towards normal driving patterns as vaccination levels have increased and infection rates have dropped,” Allstate told Rhode Island regulators in a recent filing. Other Allstate affiliate companies filed at the same time for rate increases in Texas. with indicated and actually needed rate increases in the single digits.

Severity increases that began rising the second half of 2020 for most auto coverages “have yet to moderate,” Allstate wrote. 

Not an October surprise

Other insurers are requesting or filing rate hikes in other state, as well. 

  • Geico filed earlier this month for an 8.3% overall increase in rates in Maryland, citing higher indications in bodily injury and uninsured motorist coverages. 
  • Old Dominion Insurance Co. has proposed a rate change for an overall 6% before and after rate stabilization, although an overall rate increase of 9.4% was indicated, it said. 
  • Shelter Mutual Insurance Co. filed in Louisiana, already the most expensive state for auto insurance, stating a 18.8% rate increase was indicated from losses, which were steeper in bodily injury, uninsured motorist and comprehensive coverages.  
  • Safe Auto Insurance Co. filed in Ohio for a 5% premium raise fr private passenger auto coverage, effective this fall.

While few insurers opened up about their projected rate increases, State Farm spokesman Justin Tomczak notes that although State Farm is unable to speculate about future rate adjustments, its rates remain below pre-Covid-19 levels even though miles driven and claim volume have increased. 

No relief in sight 

Frequency of claims from auto accidents and other losses fell during the pandemic and auto insurers actually rebated premium dollars back to customers. This insurance relief generally reduced premiums by 15%−25% for one or more months during the spring of 2020, according to the National Association of Insurance Commissioners, resulting in $10.5 billion in refunds, discounts, dividends, it said, crediting the Insurance Information Institute. Since them California’s top insurance regulator has demanded more in refunds. 

RIsky business  

However, as the roads opened up, people drove much faster, leading to bigger crashes and thus more severity in claims, the industry publisher Sullivan says. 

Severity has already been rising for several years as cars become more complex and costly to repair, he adds. 

Speeding behavior has remained even as miles driven has risen, Sullivan says.

"It has become a habit. When you mix higher speeds with increasingly congested roadways, you can see more accidents,” Sullivan says. Others in the industry also point to reckless behavior and gunning through red lights as continued post-shutdown behaviors. 

More than any other element, speed affects the severity of a crash, and 2020 trends are not encouraging on that front, according to industry experts. They point out that speeding tickets are up on state roads coupled with more distracted driving and impaired driving, including from cannabis as well as alcohol.  

Supply chain issues lead to longer fixes, rental times 

Another factor in the increased cost of claims are supply chain issues, according to experts Insurance Information Institute spokeswoman Loretta Worters says the issues are driving up the cost of auto parts, including the microchips needed in technology features of cars.   

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  2. National Association of Insurance Commissioners. Coverages and pricing guideline information.