Six Things 7.25.23
Insurance Thought Leadership
Transforming the Insurance Industry - Welcome to the Conversation
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Paul Carroll, Editor-in-Chief of ITL
Auto insurers are raising rates as fast as they can to stem mounting losses. For instance, Allstate just announced 12% increases in auto insurance rates in 12 markets, on top of a general 7.5% rise earlier this year.
But it's not clear that insurers can move fast enough — or that regulators and consumers will accept the rate increases.
Allstate had an unprofitable 110.1 combined ratio in auto last year, and the American Property Casualty Insurance Association said the direct loss ratio for the whole industry soared. It was 80.2 in 2022, up a whopping 24.1 points from 2020. So there's a lot of catching up to do.
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But consumers are rebelling. J.D. Power reported that shopping for auto policies in the second quarter in the U.S. was the highest they've seen in the three years they've been tracking the behavior on a daily basis. Not only that, but J.D. Power said a TransUnion survey of insurance customers in the first quarter found that "nearly 15% of respondents said they owned or used a car without valid insurance or allowed their coverage to lapse at some point in the previous six months, with nearly 30% having cited inability to pay as the primary reason."
What happens now?
Well, as it turns out, our friends Stephen Applebaum and Alan Demers sent me an article yesterday afternoon with almost the exact headline I had on my draft of Six Things — "Auto Insurance in an Existential Crisis," in their case — and they go into "What next?" in considerable detail. So, I'll summarize their thoughts here, add a couple of my own and then, as always, encourage you to read their full piece.
The short answer is that what comes next won't be pretty. The longer answer follows.
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