After giving customers credits and premium refunds in 2020 as people stayed home and insurance claims plummeted due to the COVID-19 pandemic, auto insurers are raising rates to help cover higher claim costs due to increased driving, higher repair costs and other factors.
Several major insurers, including Geico, Allstate, Progressive and Farmers, have implemented automatic premium rate increases since mid-2021, according to rate filings with the Arizona Department of Insurance and Financial Institutions.
Geico Casualty Co., Arizona’s largest private passenger auto liability insurer with a market share of nearly 15%, posted an 8% rate increase in November, along with fractional rate reductions for some covers.
State Farm Mutual, the state’s second-largest auto liability insurer, filed a 0.4% rate increase for its Arizona private auto customers, effective March 1.
Progressive Advanced Insurance Co. and its sister company Progressive Preferred, the third- and fourth-largest insurers by market share, respectively, have posted auto policy rate increases in Arizona ranging from 2.5% to 6.9% since mid- 2021, while Farmers of Arizona requested increases totaling more than 8%.
Allstate Fire & Casualty, the sixth-largest personal auto liability insurer in the state, filed a 7% increase starting this month.
Arizona does not require auto insurers to obtain state approval before changing rates, as long as the overall market is considered competitive.
Claims costs are rising
Insurers say they need higher premiums to offset higher claims losses since the height of the pandemic, citing factors such as increased driving and higher repair costs due to problems supply chain and labor shortages.
Insurance companies moved to offer premium discounts and other relief to policyholders starting in March 2020, when it quickly became apparent that insurance claims were plummeting amid COVID-19 shutdowns kept many people off the road.
“There is no doubt that at the start of the pandemic, miles traveled and claims fell off a cliff and during this unique period insurers did a lot of things to try to relieve their policyholders,” Robert said. Passmore, vice president of auto insurance and claims at the American Property Casualty Insurance Association.
“It took a while, but now we’re back to the point where people are driving as much or more than they did before the pandemic,” Passmore said citing National Highway Transportation Administration data showing that miles driven have reached near-pandemic levels and deaths have increased in 2021.
At the same time, Passmore noted, the severity of accidents, including fatalities, have increased and repair costs have risen.
State Farm, which as a mutual insurance company is owned by its policyholders, has been trying to respond to changing auto claims and costs while minimizing the impact on customers, the spokesperson said. society, Sevag Sarkissian.
State Farm provided more than $4 billion in dividends and rate reductions to its auto insurance customers at the onset of COVID-19 in early 2020. The company reduced a special premium discount in February 2021 with a 3% rate increase in Arizona.
“Our approach is to make incremental adjustments based on driving behaviors to help minimize the impact on customers,” Sarkissian said. “Automotive claims costs are rising in part due to an increase in the cost of labor, materials and supply chain issues. Although the miles driven, volume and severity of claims have increased, State Farm auto rates remain below pre-COVID-19 levels.
A report by the American Property Casualty Insurance Association in February said rising claims costs were due to increased driving and worsening driving behavior, rising medical costs, rising personal injury claim settlements, increasing severity of injuries in car crashes, and soaring car repair and replacement costs. .
As a result, motorists in Arizona are now seeing increases after getting a break during the height of the pandemic.
COVID-19 breaks debated
Although Arizona does not have the authority to pre-approve auto insurance rates, the state Department of Insurance reviews rate filings to ensure they are not unfairly discriminatory and meet other legal requirements, said Erin Klug, deputy director of the Product Filings and Compliance Division at the Arizona Department of Insurance. and financial institutions.
“The department cannot find an excessive rate as long as there is abundant competition,” Klug said. “The department reviews each rate filing it receives to ensure it is justified and meets the requirements of the law.”
While California was the only state to require insurers to give auto policyholders a break on their premiums as claims plummeted amid COVID-19 shutdowns, Arizona was among many states encouraging insurers to offer premium relief, Klug said.
Some were offering temporary premium discounts or credits, while others were changing their base rates, and most were implementing special programs to delay policy cancellations for nonpayment for customers hit hard by COVID-19. 19, she noted.
Across the industry, insurers have refunded or reduced about $14 billion in response to lower claims, according to the insurance association.
But some consumer advocates say the industry should have given policyholders a much bigger break and ended up pocketing much of those savings thanks to the sharp decline in auto losses in 2020.
Insurers should have returned about $30 billion more to policyholders, based on lower losses — including $648 million in Arizona, according to a report released last August by the Consumer Federation of America and the Center for Economic Justice.
“Since the pandemic, driving has mostly rebounded, but we strongly believe Arizona consumers and consumers across states have been overcharged by insurers,” said Michael DeLong, research and advocacy associate. for the Consumer Federation. “Insurance companies have been very, very successful and a bunch of them have responded to that not by trying to refund premiums but by giving big bonuses to their executives and dividends to their shareholders, and that’s not is not fair at all.”
APCI’s Passmore disputed the consumer advocates’ report and said premium relief is no longer warranted in the face of rapidly rising claims costs.
“They’re still talking about a time period that basically existed two years ago,” he said. “We are in a very different time now.”
Passmore said regulators and insurers must ensure rates are not unfairly discriminatory and that there are sufficient rates to ensure carriers are solvent.
“There’s no point in demanding a lot more reimbursements when you’re going to have to deal with this (increasing costs) – it’s kind of like kicking the box.”
Save on insurance
Faced with rising car insurance costs, consumers can save money by seeking lower premiums, Klug and DeLong said.
Six-month premiums for the same insured can vary by hundreds of dollars, according to a survey of auto premiums released periodically by the Arizona Department of Insurance.
The most recent 2021 survey is available online at tucne.ws/1jxf.
“We encourage everyone to shop around and spend an hour or two looking at various auto insurers and comparing different rates in their situation,” DeLong said.
Drivers willing to give up some privacy can also save by signing up for various programs in which electronic “telematics” devices are plugged into a vehicle and send data about driving behavior such as speed and sudden stops. , allowing insurers to reward top drivers with policy discounts. .
“Even as auto rates go up, Arizona drivers can save money with usage-based insurance programs,” Allstate spokeswoman Tanya Robinson said in an email. mail.
She cited Allstate’s Drivewise program, which helps customers save money based on their safe driving habits, and Milewise, which she says saves low-mileage drivers 50% over insurance policies. traditional.