As if spiraling gas prices werenโt enough, motorists across Arizona and the nation are paying more for auto insurance as repair costs and more crowded roads push premium rates higher.
After giving customers premium credits and refunds in 2020 as people stayed home and insurance claims plummeted due to the COVID-19 pandemic, auto insurers are raising rates to help cover higher claims costs driven by increased driving, higher repair costs and other factors.
Several large insurers including Geico, Allstate, Progressive and Farmers implemented auto-premium rate increases since mid-2021, rate filings with the Arizona Department of Insurance and Financial Institutions show.
Geico Casualty Co., Arizonaโs largest private-passenger auto liability insurer with a market share of nearly 15%, posted an 8% rate increase in November, along with some fractional rate reductions for some coverages.
State Farm Mutual, the stateโs second-largest auto liability insurer filed an 0.4% rate increase for its Arizona private-passenger auto customers, effective March 1.
Progressive Advanced Insurance Co. and sister Progressive Preferred, third- and fourth-largest insurers by market share, respectively, posted Arizona auto-policy rate increases ranging from 2.5% to 6.9% since mid-2021, while Farmers of Arizona filed for increases totaling more than 8%.
Allstate Fire & Casualty, the stateโs sixth-largest personal auto liability insurer, filed a 7% increase effective this month.
Arizona does not require auto insurers to get state approval before changing rates, so long as the overall market is considered competitive.
Claims costs rise
Insurers say they need higher premiums to offset higher claims losses since the height of the pandemic, citing factors including increased driving and higher repair costs driven by supply-chain issues and labor shortages.
Insurance companies moved to provide premium discounts and other relief to policyholders starting in March 2020, when it quickly became apparent that insurance claims were plummeting as COVID-19 shutdowns kept many people off the roads.
โNo question that at the beginning of the pandemic, miles driven and claims fell off a cliff and during that unique period of time insurers did a lot of things to try to provide some relief to their policyholders,โ said Robert Passmore, vice president of auto and claims policy at the American Property Casualty Insurance Association.
โItโs taken a while, but weโre now back to the point where people are driving as much or more than they were pre-pandemic,โ said Passmore citing data from the National Highway Transportation Administration showing miles traveled reached near-pandemic levels and fatalities increased in 2021.
At the same time, Passmore noted, the severity of accidents including fatalities have risen and repair costs have increased.
State Farm, which as a mutual insurance company is owned by its policyholders, has tried to respond to changing auto claims and costs while minimizing the impact on customers, company spokesman Sevag Sarkissian said.
State Farm provided over $4 billion in dividends and rate cuts to its auto-insurance customers at the onset of COVID-19 in early 2020. The company pared back a special premium discount in February 2021 with a 3% rate increase in Arizona.
โOur approach is to make incremental adjustments based on driving behaviors to help minimize the impact to customers,โ Sarkissian said. โAuto claim costs are increasing in part due to a rise in the cost of labor, materials and supply chain-related issues. Although miles driven, claim volume and severity have increased, State Farm auto rates remain below pre-COVID-19 levels.โ
A report issued by the American Property Casualty Insurance Association in February said higher claims costs are being driven by increased driving and worse driving behavior, higher medical costs, increased injury-claim settlements, increased injury severity in auto crashes and skyrocketing auto repair and replacement costs.
As a result, Arizona motorists are seeing increases now after getting a break during the height of the pandemic.
COVID-19 breaks debated
While Arizona has no power to preapprove auto insurance rates, the state insurance department reviews rate filings to make sure they are not unfairly discriminatory and meet other legal requirements, said Erin Klug, assistant director of product filing and compliance division at the Arizona Department of Insurance and Financial Institutions.
โThe department canโt find a rate excessive as long as there is ample competition,โ Klug said. โThe department scrutinizes every rate filing it receives to make sure it is justified and meets the requirements of the law.โ
While California was the only state to require insurers to give auto policyholders a break on their premiums as claims plummeted amid COVID-19 shutdowns, Arizona was among many states that encouraged insurers to offer premium relief, Klug said.
Some offered temporary premium discounts or credits, while others changed their base rates, and most set up special programs to delay policy cancellations for non-payment for customers hit hard by COVID-19, she noted.
Industrywide, insurers refunded or discounted about $14 billion in response to falling 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 that savings from the steep decline in auto losses in 2020.
Insurers should have returned about $30 billion more to policyholders, based on lower losses โ including $648 million in Arizona, says a report last August by the Consumer Federation of America and the Center for Economic Justice.
โSince the pandemic, driving has mostly rebounded, but we strongly believe that Arizona consumers and consumers in every state were overcharged by insurers,โ said Michael DeLong, research and advocacy associate for the Consumer Federation. โInsurance companies did very, very well and a bunch of them responded to this not by trying to give back premiums but by giving big bonuses to their executives and dividends to their stockholders, and itโs not fair at all.โ
The APCIโs Passmore disputed the consumer advocatesโ report and said premium relief is no longer warranted amid rapidly rising claims costs.
โTheyโre still talking about a period of time that existed basically two years ago,โ he said. โWeโre in a very different time now.โ
Passmore said regulators and insurers must ensure that rates are not unfairly discriminatory and that thereโs sufficient rates to ensure the solvency of the carriers.
โIt doesnโt do any good to demand a bunch more refunds when youโre just going to have to face that (rising costs) โ itโs kind of like kicking the can down the road.โ
Saving on insurance
In the face of rising auto insurance costs, consumers can save money by shopping around for lower premiums, Klug and DeLong said.
Six-month premiums for the same insured individual can vary by hundreds of dollars, an auto premium survey issued periodically by the Arizona Department of Insurance shows.
The most recent 2021 survey is available online at tucne.ws/1jxf.
โWe encourage everyone to shop around and spend an hour or two looking at various auto insurers and comparing the various rates in their situation,โ DeLong said.
Drivers willing to give up a little privacy can also save by signing up for various programs in which electronic โtelematicsโ devices are plugged into a vehicle and send data on driving behavior like speed and hard stops, allowing insurers to reward better drivers with policy discounts.
โEven though auto rates are rising, Arizona drivers can save money with usage-based insurance programs,โ Allstate spokeswoman Tanya Robinson said in an email.
She cited Allstateโs Drivewise program, which helps customers save based on their safe driving habits and Milewise, which she said allows low-mileage drivers to save 50% compared to traditional insurance policies.
