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Insurance costs continue to rise with NJ bracing for double-digit spikes

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Insurers are seeking to further raise rates in New Jersey, the latest in a string of nationwide spikes.

In the Garden State, Allstate is seeking a 29% rate increase while GEICO has sought a 26% bump, according to a local report. GEICO did not respond to a Repairer Driven News queries, seeking comment on why the hikes were necessary.

However, an Allstate spokeswoman attributed the proposed increases to a higher cost of doing business.

“More frequent, severe accidents and higher repair prices are causing auto insurance rates to rise,” Joyce Buford told RDN. “Despite this, customers continue to get competitive prices with Allstate and can save money with Drivewise and Milewise based on their driving. Customers can contact their Allstate agent to discuss ways to save.”

Christine O’Brien, president of the Insurance Council of New Jersey, reiterated that a number of factors are contributing to rate increases.

“Allstate is on the record by saying that they have seen an uptick in higher repair prices, as well as severe accidents [because] we’ve seen an increase of severity through the pandemic that hasn’t tapered off,” she said. “So where we would normally see severity and frequency even out over time, even though frequency has now returned back to normal levels pre-COVID, the severity continues to increase.”

She said there are a number of companies seeking rate increases in New Jersey, and that if an insurer is seeking a bump greater than 7% it can trigger a review before the state’s rate counsel.

“When that happens, once rate counsel reviews the filing, it makes a recommendation to the Department of Banking and Insurance, who then has the final say on the final rate approval,” O’Brien said. “The Department of Banking Insurance is really looking at each filing with a critical eye and there [have been] a lot of requests not being granted at the exact same amount but slightly lower.”

A separate Wall Street Journal article detailed how rates are “soaring with little relief in sight” in New York, Georgia, and California.

In Florida, auto insurance now costs 40% more than 40% the national average, according to BankRate.

According to the Houston Chronicle, Texas auto insurance costs increased by 24% last year alone.

The U.S. Consumer Price Index indicates national auto insurance costs are up by an average of 17% year-over-year.

The International Insurance Society said earlier this month that U.S. insurers have been paying more than other regions to repair and rebuild damaged properties since 2018 due to inflation.

An executive briefing conducted on its behalf showed the U.S. led Canada, the European Union, Japan, Korea, and the United Kingdom in experiencing the highest cumulative inflation rate throughout the five-year timeframe.

The U.S. also had the highest cumulative inflation rate spike for insurance replacement costs throughout the same period, it said.

“Quantifying the relationship between inflation and insurance replacement costs across national and regional P&C/Non-Life insurance markets can provide an additional framework to maximize insurance capital allocation, including reinsurance capacity, by seeking uncorrelated underlying economic fundamentals and insurance performance metrics,” Michel Léonard, the Insurance Information Institute’s chief economist and data scientist, wrote in the executive briefing.

“Further, separating correlated and uncorrelated line-specific insurance replacement costs drivers can increase the ability to forecast line-specific performance metrics and provide added guidance to industry stakeholders, including regulators, seeking to maximize liquidity and solvency during times of economic stress such as the high inflation that characterized the COVID-19 pandemic and its aftermath.”

Rates have been steadily rising throughout the past few years, with insurers attributing the increases to inflation, parts and labor shortages, catastrophe events, and higher repair costs.

Allstate recently revealed that it sustained $885 million in catastrophe losses in May alone, representing nearly $700 million after tax.

It also said that it implemented auto rate increases averaging 9.3% across 15 locations but did not specify which areas were subjected to price hikes.

For April and May combined, it said its catastrophe losses totaled $1.68 billion pre-tax.

Allstate also sustained catastrophe losses of more than $1 billion during the month of March and said Q1 losses total $1.69 billion. When speaking of that month’s losses, attributed its bleeding bottom line to 10 events, and said it recouped some of its finances by “favorable reserve estimates for prior events.”

Some states are taking action to prevent insurers from continuing their double-digit increases.

Allstate policyholders in Georgia experienced 40% increases last year, prompting lawmakers to enact a law giving the state authority to review rate insurance filings before they go into effect.

Georgia’s law takes effect July 1.

In Illinois, House Bill 2203 is on the table for consideration. Called the Motor Vehicle Insurance Fairness Act, it aims to give the state and its constituents more control over policy increases and would ban insurance companies from using non-driving factors when setting rates.

A number of reports have indicated that drivers are becoming increasingly frustrated with insurers for increased costs as well as other factors including long wait times and disappointing claims experiences.

J.D. Power and TransUnions’s Q1 2023 loyalty indicator and shopping trends (LIST) report found that insurance shopping continued to increase and GEICO, for the first time since the report has been released, didn’t have the highest number of new customers who switched from other carriers.

The report found a nearly half percent quote rate increase over Q4 2022 to 12.4%. However, a slowdown in shopping that began in December and lasted into January “made a dramatic turnaround” in February from 11.6% to 12.6% then 13.1% in January. The March figure is a new record.


Featured image credit: juststock/iStock

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