Allstate and State Farm – two of America’s biggest P&C insurance companies – are looking to increase their auto insurance rates significantly, citing inflationary pressures and increases in the severity of auto accidents as reasons for the hikes.
Since the start of 2022, Allstate had implemented 72 rate increases averaging 10.3% across 51 locations. Allstate chief financial officer Jess Merten also noted that the increases totaled $777 million in August and $2.5 billion year-to-date.
Last month, Allstate raised auto insurance rates in Illinois by 14% – which is more than the 8.3% average increase in the national Consumer Price Index over the past year.
“We evaluate the frequency and severity of accidents at a state level,” an Allstate representative told Chicago Tribune. “Beyond inflation, some of the factors driving losses up in Illinois are the same things impacting the rest of the country: miles driven have gone back up to pre-pandemic levels, vehicle collisions are more severe, speed of driving, distracted driving.”
The representative added that Illinois is “one of the top states for vehicle theft,” and that Allstate had also raised rates in other states such as New Mexico, Texas, Massachusetts, New Hampshire, Oregon, Arizona, Pennsylvania, and Florida in August.
While not as high as Allstate’s, State Farm also raised its rates in the state by 8.4%, which is just above the national average, the Chicago Tribune reported. That increase followed an earlier 3% increase in June and another 4.8% in March.
“As more people are on the roads, we’re seeing an increase in claims,” a State Farm representative said. “Auto claim costs are being compounded by record inflation and supply chain disruptions. All of this has increased the cost of labor and materials, which translates to higher auto repair costs.”
To corroborate the findings of the insurer, Repairer Driven News cited S&P Global Financial’s data, which found that earlier this month, State Farm’s personal auto loss ratio jumped to 93%, which is a year-over-year increase of 22.9% from 70.1% in the prior-year period, and a 10.8% increase from Q1 2022.
This increase in the loss ratio for personal auto lines is not exclusive to the two insurers, S&P noted. Across the industry, the loss ratio for auto insurers jumped to 78.4% in the second quarter, representing a 12.4% increase from the prior year and a 6% increase from Q1 2022.
A principal analyst with S&P noted that the severities across all coverages “were impacted by longer times to close claims due to automotive supply chain disruptions and labor shortages.”
News of the two insurers’ plans to further increase rates comes after Consumer Watchdog petitioned the California Department of Insurance to reject Allstate’s proposed auto insurance rate increase in the state by $165. The consumer advocate also asked the regulator to prohibit the insurer from using a job-based rating system, which would unfairly price premiums based on a policyholder’s occupation and degree, it claimed.