Car insurance company profits are hitting record highs at the same time that drivers are paying higher premiums to insure their vehicles, reports The Wall Street Journal.
In other words, it’s just more “business as usual.”
Here are three simple truths about car insurance companies:
These are for-profit businesses. They exist to make profits,
They make profits by investing your premiums in the stock and bond markets. If these investments then lose money, they raise premiums. They also increase profits by denying and refusing to pay out on valid claims and by delaying payment on claims for as long as possible to earn more returns on their investments.
Blaming lawyers and lawsuits when they make bad investments is a convenient excuse for when they keep raising your premiums. There is no factual basis to support this claim – and there never has been – but the propagandists and insurance company lobbyists have used this convenient excuse for the past 40 years.
How high are car insurance company profits?
According to the WSJ, one of Michigan’s largest auto insurers is enjoying record profits right now. Progressive’s “quarterly profit more than doubled from a year earlier.”
Similarly, Travelers, another Michigan auto insurer, “reported a record profit for its fourth quarter.”
Why are car insurance company profits so high?
If you guessed “steep rate hikes,” as the WSJ stated, then you’re right. The WSJ explains that insurers see their “path to profitability” as being paved by “[b]ig rate increases,” “sharply higher prices,” “reduced coverage” and “fewer, if any, choices for coverage” for drivers and policyholders.
Since 2021, “10 companies—Allstate, American Family Insurance, Farmers Insurance, Geico, Liberty Mutual, Nationwide, Progressive, State Farm, Travelers and USAA—have each won regulatory approval to boost auto-insurance rates by more than 20%,” reported the WSJ.
Why does this sound so familiar?
In recent years, profits for car insurance companies that do business in Michigan have been described by one study as “record-smashing.”
The study found that insurers such as Progressive, State Farm, Allstate and Citizens – which make up nearly 50% of Michigan’s auto insurance market – had “reported windfall profits.”
In fact, Auto-Owners Insurance Company, which is headquartered in Michigan, recently boasted having had “a record ninth consecutive year” of “underwriting profit” with “more than $1.1 billion in new business.”
Do Michigan drivers really pay that much?
Don’t forget that as the insurance companies are lining their pockets with their record profits, drivers especially in Michigan are emptying their pockets just to afford insurance to keep their vehicles on the road. The studies show that Michigan has the highest auto insurance rates in the nation.
MarketWatch Guides lists Michigan as the “most expensive” state “with the highest average full-coverage car insurance rates.”
ValuePenguin reports that “Michigan has by far the most expensive car insurance rates in the country.” The average rate in Michigan is “more than double the national average.”
The Zebra lists Michigan as having the most expensive “average monthly auto insurance premium.”
Who’s getting rich from car insurance company profits?
The heads of the nation’s largest auto insurance are getting rich from exorbitant car insurance company profits. That’s who. Take the CEO of State Farm for example. His compensation in 2022 was north of $24 million. The CEO of Travelers took in nearly $21 million. And the Allstate head collected a cool $18 million.
A study by the Consumer Federation of America revealed the CEO compensation above as well as the compensation for other top insurance execs.
Of its study, the CFA said it shows that “that CEOs overseeing the nation’s ten largest personal lines insurance companies raked in massive salaries, bonuses, and other payments, while spiking insurance rates are causing hardship for policyholders across the country.”
Car Insurance Company Profits Skyrocket As Drivers Pay More For Less Coverage. Car insurance company profits are hitting record highs at the same time that drivers are paying higher premiums to insure their vehicles, reports The Wall Street Journal. In other words, it's just more “business as usual.”
Higher overall auto prices and auto repair costs prompted insurers to start raising premiums as overall car values jumped. Price increases for insurance rates, like many other increases from food to clothing, have been sticky and are less likely to drop at the same rate as broader inflation, if at all.
Men tend to have higher premiums because they're more likely to take risks while driving and get into accidents. However, the following states don't allow gender to be used as a factor in determining car insurance rates: California. Hawaii.
While it can seem arbitrary, there are actual reasons you can see your price go up and down. Car insurance rates can change based on factors like claims, driving history, adding new drivers to your policy, and even your credit score.
It's not uncommon for your rates to go up annually, even if you haven't filed a claim. This can be caused by inflation, an increase in claims in your area or any number of other reasons.
Auto insurance is only about one-third of all the insurance carriers provide in addition to home insurance and other types of coverage. The industry's overall profit margin dipped from 10.9% in 2021 to 4.7% in 2022, according to S&P Capital IQ.
As unfair as it may seem, you may experience an auto rate increase due to insurance claims data in your ZIP code. If your area has a high rate of theft, accident, or weather-related claims, it becomes riskier for an insurance company to cover drivers there.
The rise in insurance costs is in addition to historically high prices for new and used vehicles since the coronavirus pandemic, as well as rising costs to repair vehicles.
In general, car insurance companies charge male drivers more for coverage because they're more likely to get into accidents. But while most states allow insurers to consider gender when setting rates, your age, location, insurance provider and driving record usually make a bigger difference.
Younger, less experienced drivers are statistically more likely to drive dangerously and to be involved in fatal accidents, data from the National Highway Traffic Safety Administration (NHTSA) shows. As a result, teens and young adults typically pay the highest rates for auto insurance.
Your age – In general, mature drivers have fewer accidents than less experienced drivers, particularly teenagers. Insurers generally charge more if teenagers or young people below age 25 drive your car.
Insurance companies often view a lower car insurance credit score as an indicator of increased risk, which may lead to higher premiums for those with less favorable credit histories.
Although most people believe that 25 is the age when car insurance rates go down, the most significant decreases occur when drivers turn 19 and 21. Rates continue to lower until you turn 30. After that, they tend to remain roughly the same.
Drivers in Michigan and Florida pay some of the highest rates in the nation for both minimum liability and full-coverage policies. Vermont and Maine are two of the cheapest states for full coverage, while Iowa and Wyoming are cheaper for minimum coverage.
Annual increases are typical across the industry, but the way your risk factors are viewed by a particular company may vary. Get to understand your coverage and discounts to ensure you are getting the best price for the assurance you need.
State Farm is the largest auto insurance company in the U.S. It earns about 18% of the money people spend on personal car insurance policies. The company has about 58,000 employees and 19,000 agents.
All told, America's largest health insurers raked in more than $41 billion of profits in 2022. That is a staggering sum of money. It is so much money, in fact, that you might assume that Americans are able to receive high quality, accessible care whenever they need it. Sadly, that is not the case.
March's rise in insurance costs is the largest gain since December 1976, when prices rose 22.4% over the prior year. The sticker shock hitting many American drivers is being driven by a rise in accidents, the severity of accidents, and geographical factors combining to create a perfect storm and push costs higher.
Your Progressive rates may increase after six months depending on a number of factors. Like other car insurance providers, Progressive will typically raise your rates if you receive a speeding ticket or moving violation, cause an accident or make comprehensive insurance claims.
Auto insurance rates are impacted by inflation in multiple areas of the automotive industry, including vehicle values, labor costs, the price of replacement parts and health care costs.
Why homeowners insurance rates are rising. Several factors are making homeowners insurance more expensive: The increase in the number and severity of hurricanes, floods, tornadoes and other harsh weather has led to a spike in claims in many parts of the country.
Introduction: My name is Pres. Carey Rath, I am a faithful, funny, vast, joyous, lively, brave, glamorous person who loves writing and wants to share my knowledge and understanding with you.
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