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Among the four largest U.S. private auto insurers, Berkshire Hathaway Inc.’s GEICO Corp. is expected to see the largest premium increases from rate hikes approved in the second half of 2022.
GEICO is projected to take in additional premiums of $3.29 billion for the half, while units of State Farm Mutual Automobile Insurance Co. stand to see premiums rise by $2.42 billion, according to an S&P Global Market Intelligence analysis.
U.S. states employ a variety of rate regulation mechanisms, including prior approval, modified prior approval, file and use as well as use and file. Some states do not require explicit regulatory approval prior to insurers using new rates. This analysis is based on when rate filings are “disposed” by state regulators and does not take into account when those new rates became effective for new and renewal business. In some instances, a new rate may have been in effect prior to the month the filing was approved by the regulator.
The overall rate impact is calculated based on the aggregated written premium change from all rate filings during the period as a percentage of the largest written premium submitted by each filer in the group in every state. The overall rate impact for each group, in some states, may be higher or lower than each approved change in the period.
The Allstate Corp. is expected to see a premium increase of $1.55 billion from hikes approved in the back half of 2022. Premium growth for The Progressive Corp. is projected to be $638 million, compared to $2.24 billion during the first six months of 2022.
The rate increases come as carriers grappled with poor underwriting results within the business line.
GEICO, Allstate receive approvals in California
California finally lifted its moratorium on granting private auto premium hikes for GEICO and Allstate, allowing the two insurers to boost their rates in the state by 6.9%, which equates to an additional $255.9 million and $165.5 million in calculated premiums, respectively.
GEICO’s increase in the Golden State — the largest state in the U.S. for private auto premiums — was the most impactful on the West for the six months to Dec. 31, 2022. The insurer also estimates that it will receive at least a nine-figure premium impact in two other states. An overall increase of 19.1% in Arizona is expected to raise $198.3 million in additional calculated premium for the insurer, along with an estimated $111.5 million in Nevada.
The most significant increase for State Farm will be in Arizona, where a 16.8% overall rate hike is projected to raise an additional $172.3 million in calculated premium.
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New York grants Big 4 almost $1B in rate hikes
The biggest increase during the last six months of 2022 is in New York, where regulators granted an overall rise of 14.2% for GEICO. The insurer estimates the hike to translate into $653.6 million in additional private auto premiums.
State Farm’s increase of 10.6% is expected to raise $217.7 million in calculated premium in the Empire State, followed by $59.5 million of additional premiums for Progressive. Allstate’s overall increase of 3.4% will raise its premiums by $33.6 million.
GEICO also received approval to raise rates in every other state in the Northeast. In total, the insurer is expecting $597.3 million in additional calculated premium across those eight states.
State Farm’s southern rate hikes
State Farm had the most impactful increase in the South in the period. Its overall rate increase of 12.8% in Georgia is expected to boost its premiums by $333.5 million. The nation’s largest private auto insurer estimated its premiums will rise in Texas by $217 million from an overall rate increase of 6.1%.
GEICO expects its personal auto premiums to grow by more than $100 million in five states in the region. The largest estimated premium increase of $274.3 million will occur in Maryland, where the insurer boosted its overall premium rates by 18.4%. Its overall rate increase of 10.0% in Georgia is expected to grow the insurer’s calculated premium by $135.7 million.
Progressive cuts rates in several Midwestern states
Progressive lowered rates in three Midwestern states during the second half of 2022, with the most significant change occurring in Missouri. Its overall rate decrease of 2.4% will lower its calculated premiums by $41.2 million in the Show-Me State. The insurer also decreased its private auto rates in Illinois and Wisconsin.
On the other hand, Progressive boosted its overall rate in Michigan by 7.3%, which it expects to increase premiums by $135.9 million.