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Arizona Auto Insurance Rates Rising on Heels of COVID


As if rising gas prices weren’t enough, motorists across Arizona and the state are paying more for auto insurance as repair costs and denser roads push premium rates higher.

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After providing premium credit and refunds to customers in 2020 as people stayed home and insurance claims plummeted due to the COVID-19 pandemic, auto insurance companies raised rates to help cover higher claims costs driven by increased driving, repair costs. higher, and other factors.

Several major insurers including Geico, Allstate, Progressive and Farmers are implementing automatic premium rate increases from mid-2021, filings with the Arizona Department of Insurance and Financial Institutions show.

Geico Casualty Co., Arizona’s largest private passenger car insurance company with nearly 15% market share, posted an 8% rate increase in November, along with some fractional rate reductions for some coverages.

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State Farm Mutual, the state’s second-largest auto liability insurance company, proposed a 0.4% rate increase for Arizona private passenger car customers, effective March 1.

Progressive Advanced Insurance Co. and sister Progressive Preferred, the 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 proposed a total increase of more than 8 %.

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Allstate Fire & Casualty, the state’s sixth-largest private auto insurance company, filed for a 7 percent increase effective this month.

Arizona does not require auto insurance companies to obtain state approval before changing rates, as long as the market as a whole is considered competitive.

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 problems and labor shortages.

Insurance companies are moving to provide premium discounts and other assistance to policyholders starting in March 2020, when it quickly became clear that insurance claims were plummeting as the COVID-19 shutdown kept a lot of people off the road.

“There’s no doubt that at the start of the pandemic, mileage and claims fell off a cliff and during that unique period of time, insurance companies did a lot to try to provide relief to their policyholders,” said Robert Passmore, vice president of auto policy and claims at American Property Casualty Insurance Association.

“It took a while, but we’re now back to a point where people are driving more or more than they were before the pandemic,” Passmore said, citing data from the National Highway Transportation Administration showing mileage reaching near-pandemic levels. and deaths to increase in 2021.

At the same time, Passmore noted, the severity of accidents including fatalities is increasing and repair costs are rising.

State Farm, which as a co-insurance company owned by its policyholders, has tried to respond to changes in auto claims and costs while minimizing the impact on customers, company spokesman Sevag Sarkissian said.

State Farm provided more than $4 billion in dividends and interest rate cuts to its auto insurance customers as early as COVID-19 in early 2020. The company reduced its special premium discount in February 2021 with a 3% rate increase in Arizona.

“Our approach is to make additional adjustments based on driving behavior to help minimize the impact on customers,” said Sarkissian. “The cost of automatic claims increased in part due to rising costs of labor, materials and supply chain related issues. Although mileage, claim volume and severity have increased, State Farm’s auto rates remain below pre-COVID-19 levels.”

A report released by the American Property Casualty Insurance Association in February said higher claim costs were driven by increased driving and poorer driving behavior, higher medical costs, increased injury claim settlements, increased severity of injuries in auto accidents and skyrocketing costs. car repair and replacement. .

As a result, Arizona motorists are seeing an increase now that they are getting a break during the height of the pandemic.

While Arizona doesn’t have the power to approve auto insurance rates beforehand, the state’s department of insurance reviews tariff submissions to make sure they’re 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.

“The department can’t find excessive tariffs as long as there’s a lot of competition,” Klug said. “The department scrutinizes every tariff application it receives to ensure it is justified and meets legal requirements.”

While California is the only state that requires insurers to give auto policyholders a break on their premiums as claims plummeted amid the COVID-19 shutdown, Arizona is among many states encouraging insurers to offer premium assistance, Klug said. .

Some are offering temporary premium discounts or credits, while others are changing their base rates, and most are setting up special programs to delay policy cancellations for non-payment of customers affected by COVID-19, he said.

Across the industry, insurers returned or discounted about $14 billion in response to falling claims, according to insurance associations.

But some consumer advocates say the industry should have given policyholders a much bigger break and ended up pocketing much of those savings from the sharp decline in auto losses in 2020.

Insurers should return about $30 billion more to policyholders, based on lower losses, including $648 million in Arizona, said a report last August by the American Federation of Consumers and the Center for Economic Justice.

“Since the pandemic, driving has largely recovered, but we strongly believe that Arizona consumers and consumers in every state are overcharged by insurance companies,” said Michael DeLong, research and advocacy fellow for the Consumer Federation. “Insurance companies are doing very, very well and a lot of them are responding to this not by trying to return premiums but by giving big bonuses to their executives and dividends to their shareholders, and that’s totally unfair.”

APCI’s Passmore disputed consumer advocate reports and said premium waivers were no longer guaranteed amid rapidly rising claims costs.

“They’re still talking about a time period that was basically two years ago,” he said. “We are in a very different time now.”

Passmore said regulators and insurers must ensure that tariffs are not discriminatory and that there are sufficient rates to ensure operator solvency.

In the face of rising auto insurance costs, consumers can save money by shopping for lower premiums, said Klug and DeLong.

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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