As if soaring gas prices weren’t enough, motorists in Arizona and across the country are paying more for auto insurance as repair costs and busier roads drive up premium rates.
After providing customers with credits and premium refunds in 2020 as insurance claims plummeted due to the pandemic, auto insurers are raising rates to help cover higher claims costs due to the increased driving and other factors.
Several major insurers, including automatic premium rate increases implemented since mid-2021, show filings with the Arizona Department of Insurance and Financial Institutions.
Geico Casualty Co. posted an 8% rate hike in November. State Farm Mutual filed a 0.4% rate increase for its private auto customers in Arizona. Progressive Advanced Insurance Co. and its sister company Progressive Preferred have posted auto policy rate increases in Arizona ranging from 2.5% to 6.9% since mid-2021, while Farmers of Arizona has requested increases totaling more than 8%. Allstate Fire & Casualty filed a 7% raise effective this month.
Arizona does not require auto insurers to obtain state approval before changing rates. 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.
Insurers moved to offer premium discounts and other relief to policyholders from March 2020, when it was evident insurance claims were plummeting as closures kept many people out.
“There is no doubt that at the start of the pandemic, miles traveled and claims fell off a cliff and during this unique time 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.
Passmore said people have returned to normal driving levels, citing data from the National Highway Transportation Administration showing miles driven have reached near-pandemic levels and fatalities 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 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,” company spokesman Sevag 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 published by APCIA in February indicates that the rise in claims costs is due to the increase in driving and the deterioration of driving behavior, rising medical costs, increased claims settlements for injuries, the increasing severity of injuries in car crashes, and the skyrocketing cost of repairing and replacing cars.
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.
While California was the only state to require insurers to give auto policyholders a break on premiums amid COVID-19 shutdowns, Arizona was among many states encouraging insurers to offer premium relief, Klug said.
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 drop 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 that consumers in Arizona and consumers in every state have been overcharged by insurers,” said Michael DeLong, research and advocacy associate for the Consumer Federation.
APCI’s Passmore disputed the consumer advocates’ report and said premium relief is no longer warranted amid 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.
Faced with rising car insurance costs, consumers can save money by seeking lower premiums, Klug and DeLong said.
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COVID-19 Trends Arizona Auto Price Trends