WSJ article from Monday.
Insurance premiums have outpaced inflation. Car insurance rates increased 19.2% in the 12 months through November, six times the rise in overall consumer prices, Labor Department data show. It was the 15th consecutive month of double-digit percentage increases in premiums, year-over-year, the longest stretch of such high hikes since the mid-1980s, according to S&P Global.
https://www.wsj.com/business/insuran...hange-03b806f3
https://archive.is/20240108215420/ht...hange-03b806f3
Some highlights:
After Allstate suffered billions of dollars in losses and failed to get the rate increases it wanted, it resorted to the nuclear option.
The insurance giant threatened last fall to stop renewing auto insurance for customers in three states that hadn’t given in to its demands, which would have left those policyholders scrambling for coverage. The states blinked.
In December, New Jersey approved auto rate increases for Allstate averaging 17%, and New York, a 15% hike. Regulators in California are allowing Allstate to boost auto rates by 30%, but still haven’t decided on its request for a 40% increase in home-insurance rates after the insurer refused to write new policies.
For many Americans, getting insurance for both their cars and homes has gone from a routine, generally manageable expense to a do-or-die ordeal that can strain household budgets.
Insurers are coming off some of their worst years in history. Catastrophic damage from storms and wildfires is one big reason. The past decade of global natural catastrophes has been the costliest ever. Warmer temperatures have made storms worse and contributed to droughts that have elevated wildfire risk. Too many new homes were built in areas at risk of fire.
As losses mounted, inflation only made matters worse, boosting the cost of repairing or replacing cars or homes.
Climate change also has made it harder for insurers to measure their risks, pushing some to demand even higher premiums to cushion against future losses.
“I have never seen the overall market this bad,” said Barry Gilway, a 52-year veteran of the industry who retired in 2023 as head of Florida’s Citizens Property Insurance, a state-created insurer of last resort that sells plans to people who can’t get coverage elsewhere.
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Allstate Chief Executive Tom Wilson defended the threat to yank auto coverage in the three states that generated heavy losses. “We can’t afford to use shareholder money…to support an underpriced product,” he said. A company spokesman said the “rate approvals allow us to protect more customers as we work with state regulators to improve insurance availability.”
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Insurance premiums have outpaced inflation. Car insurance rates increased 19.2% in the 12 months through November, six times the rise in overall consumer prices, Labor Department data show. It was the 15th consecutive month of double-digit percentage increases in premiums, year-over-year, the longest stretch of such high hikes since the mid-1980s, according to S&P Global.
Simon Edwards drives a 2012 Mazda 5 in his hometown of Las Vegas. The monthly premium of his Geico auto insurance, he said, has shot up 72% in less than a year, from $130 in April to $223 now. “I’ve been in no accidents, no tickets, been with Geico for many years,” he said.
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Among the factors pushing up the price of auto insurance: Prices of new and used cars, and parts, have risen, more people are driving expensive vehicles, and extreme weather is destroying more cars.
“I’ve been here 27 years, and we’ve never increased auto rates in the way we have in the last two years,” said Allstate CEO Wilson.
Wilson asked hundreds of his company’s agents at a fall event in Orlando how customers were reacting. “I was like, ‘How’s it going? What are people saying? If I’d said to you three years ago we were going to raise auto prices by 17.5% in one year, you would have thrown me out.’ ”
The answer he got back, Wilson said, was that “people understand it, they understand that their cars and their houses are worth more money.” But, he said, “it’s clearly a burden for customers, and we need to figure out what to do about it.”
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Companies are choking off new business by slashing advertising, closing sales offices or erecting barriers to getting quotes.
State Farm spent 72% less on broadcast and cable advertising in the nine months through Sept. 30, compared with the year-earlier period, according to advertising tracking company AdImpact. Geico cut back by 81%, the data show. A State Farm spokesman confirmed ad spending was down, but said the company didn’t think tracking services completely captured its marketing spending.
Geico in 2022 closed all its sales offices in California. Search for an agent on the Geico website, and the alphabetical list of states skips straight from Arkansas to Colorado. California appears not to exist. A Geico spokesman said customers still have the option to buy its policies in California directly from the company.
Agents say another common technique for restricting unprofitable growth is insisting on hard-to-locate paperwork upfront. Proof that the plumbing’s been updated, say, or documentation of work done on the roof. “It’s a way to say, we don’t want the business,” said Gaspar.
Last summer, Nationwide said it was requiring customers to supply documentation before the company would provide quotes for some new home or auto insurance products in certain states. The company, which declined to name the affected states, said the move was a response to “strong headwinds” buffeting the industry.