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State Farm hikes Louisiana auto policies by 17%, others could follow

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State Farm has been approved to raise its car insurance rates by 17.3% in Louisiana, the state’s insurance commissioner confirmed in a move expected to affect more than 1 million drivers.

Louisiana Insurance Commissioner Jim Donelan told Repairer Driven News that State Farm’s increase was among a number of others on the table, including a requested 20.8% increase from Safeco Insurance Co. of Oregon. Others yet to be approved include a proposed:

    • 8.2% increase from Insurance Services Office Inc.;
    • 18.1% increase from Imperial Fire and Casualty Insurance Co.;
    • 30% increase from Horace Mann Insurance Co.; and
    • 10% increase from Great Northern Insurance Co.

Donelan said State Farm initially requested an 18.3% average rate increase but his office determined the actuarially justified increase to be 17.3%.

“This rate increase is primarily driven by inflation and increasing cost of labor and cost of repairs to include sophisticated equipment that has increased in cost to acquire and to repair and replace,” he said. “Thus, this increase will primarily impact drivers who purchase full coverage to include comprehensive and collision as opposed to the 40% of our drivers who purchase just the liability limits required by law. Therefore, those purchasing minimal limits will see on average a much lower increase.”
When asked if customers should expect that insurance companies will cover the rising costs of repairs and the tasks necessary to restore sophisticated equipment given the Insurance Commissioner’s reasoning for the increase, a spokeswoman said “this rate increase brings no change in coverage for vehicle repairs. Those are covered by state laws and policy provisions.”

The spike is the latest State Farm has made nationwide throughout the year, according to an S&P report. Its analysis showed that during Q1, the insurer was approved for:

    • A 5.3% increase in California;
    • A 13.3% increase in Texas;
    • An 8.2% increase in Pennsylvania;
    • A 5.7% increase in Michigan; and
    • A 6.5% increase in Illinois.

“Overall, State Farm and its subsidiaries received approvals for 65 rate hikes across 29 different states during the quarter,” S&P said in a May briefing. “The aggregate of the calculated premium change for the filings is $2.60 billion. This is the fourth consecutive quarter in which the calculated premium change from the group’s approved rate filings exceeded $1 billion.”

State Farm did not respond to a Repairer Driven News query and has not yet released its Q2 results.

Meanwhile, a recently-released mid-year report from Insurify showed that auto insurance prices increased an average of 17% nationwide during the first six months of a year. It is projecting an additional 4% increase by the end of the year.

“The skyrocketing auto insurance premiums in 2023 are atypical,” Insurify wrote. “For comparison, rates increased by 12% in 2022 and even dipped slightly in 2020 and 2021 as insurers benefited from fewer claims as a result of COVID-19 lockdowns.

“Inflation, the increasing cost of auto parts, natural disasters, legislative changes, and insurers grappling with record-breaking losses have converged to produce the dramatic price hikes policyholders face in 2023.”

A separate report released last week found that drivers with fair or poor credit scores are, in some cases, paying more than twice as much as those with excellent credit and the same driving record.

Consumer Federation of America’s (CFA’s) report found that compared to drivers with excellent credit, those with poor credit are paying 143% more in Florida, 172% more in Minnesota, and 263% more in Michigan.

“On average, a consumer with poor credit has to pay twice as much for auto insurance as a driver with excellent credit, even if everything else, including their driving safety history, are the same,” said Douglas Heller, CFA’s director of insurance and the report’s co-author. “Not only is this unfair to safe drivers, because of longstanding and institutional biases, the use of credit history for insurance pricing leads to disproportionately higher premiums for lower-income drivers and people of color.”


Main image: iStock/JHVEPhoto

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