Washington DC. – As American drivers face a series of auto insurance premium hikes from several of the nation’s largest insurers, corporate CEOs are taking in massive salaries and bonuses. According to a review by the Consumer Federation of America (CFA) of public filings, insurance CEOs received hundreds of millions of dollars in salaries, bonuses, stock and a golden parachute in 2020 and 2021, as companies posted profits exceptional items resulting from the covid19 pandemic.
“As Americans struggle to pay higher insurance premiums and face two years of pandemic challenges, insurance executives have taken corporate excesses to a new level,” Douglas Heller said. , director of insurance for CFA. “The four largest auto insurers have paid their top executives a total of $196.8 million between 2020 and 2021. At the same time, they are demanding rate hikes from consumers who are required by law to buy the product they sell.”
Using data collected through filings with the Securities and Exchange Commission and the Nebraska Department of Insurance, CFA has compiled the reported compensation of the highest-paid executives of several of the nation’s largest auto insurers for 2020 and 2021. Because data reported to the Nebraska Department of Insurance may exclude compensation paid to executives by affiliated companies, the compensation figures below may underrepresent executive earnings.
The $77 million golden parachute that GEICO paid to its former CEO Olza “Tony” Nicely, who served as the company’s executive chairman during the period, stands out as the biggest pandemic payout. In August 2020, the CFA called out GEICO for its “worst in the country” covid reimbursement program. At the time, the CFA said the company should return far more bonuses to drivers as driving levels remained low and also that GEICO should end its practice of requiring customers to renew their policies. before receiving their reimbursement in the event of a pandemic.
The CFA also pointed to the massive bonuses paid to State Farm CEO Michael Tipsord in 2020 and 2021. According to documents filed with the Nebraska department, while State Farm paid its chief executive a salary of between 1.94 and $2.15 million from 2019 to 2021, the company significantly increased the bonuses paid to Tipsord from $8.3 million in 2019 to $18.1 million in 2020 and $22.4 million in 2021.
“Consumers should have received additional premium refunds during the pandemic when we were all stuck at home and the roads were empty. Instead, auto insurers paid huge dividends to investors and gave mega-bonuses to their CEOs,” said Michael DeLong, research and advocacy associate with the Consumer Federation of America, noting that companies such as Progressive and Allstate have paid their biggest dividends to shareholders during the pandemic. . “When these insurance companies say they need higher and higher rates to account for inflation, regulators should ask themselves: if times are so tough that companies need to raise rates, why there been so much inflation in executive compensation?”
Insurance departments should collect data on executive compensation and prevent insurers from adding excessive executive compensation to policyholder premiums
Since consumers and businesses are often required to purchase insurance by law or by banks in order to obtain a loan, states must do more to protect consumers from excessive executive compensation. The CFA cited the regulatory practices of Nebraska and California as models for evaluating executive compensation practices (Nebraska) and protecting consumers from executive greed (California).
Under Nebraska law (NE RS Section 44-322), insurance companies must disclose, in a public document, the salaries and other compensation of company officers. Longtime insurance industry analyst Joseph Belth, who reports on compensation on his industry-focused blog, says that because some companies allocate executive salaries to different subsidiaries, it’s often difficult to calculate the total compensation of some executives, which is why some of them the above data may be an underestimate of the total salary package. Still, Nebraska’s disclosure law is a valuable tool for policymakers, regulators and the public who want to know how insurance companies spend the premium consumers pay.
Under California’s voter-approved consumer protection law regulations, known as Proposition 103, a formula calculates the maximum allowable executive compensation for each insurer’s top five executives – the amount differs depending on of the size of the company. Once authorized compensation is determined, while insurers can pay their executives as they see fit, any compensation above the maximum is included in another formula that reduces insurance rates to account for excessive compensation. For example, in a 2021 rate filing, State Farm reported that the “maximum allowable” salary for its top five executives was $7,231,925 combined for 2020. Since the five highest-paid executives actually received $43,199,446 that year, the insurance rates he could California policyholders were slashed to account for the nearly $36 million in excess claims that year. Notably, State Farm’s average executive compensation in this pandemic year was more than double the calculated excess compensation in 2019 and quadrupled the amount of State Farm’s excessive compensation in 2018.
“Americans spend a quarter of a trillion dollars each year on auto insurance alone and another half a trillion on other property and casualty insurance policies,” said CFA’s Douglas Heller. “States should do more to ensure that our bonuses are not used to fund grossly excessive executive compensation.”
Michael DeLong, 925-708-1135
Doug Heller, 310-480-4170