New Study Highlights Challenges in Personal Auto Insurance Rate Filings

Insurance Research Council

MALVERN, PA — A recent study from the Insurance Research Council (IRC), an affiliate of The Institutes, has shed light on the increasing difficulties in securing approved rate filings for personal auto insurance across the United States. According to the report, these growing challenges have negatively impacted market performance over the last decade.

The study, Rate Regulation in Personal Auto Insurance: Comparison of State Systems, analyzed regulatory processes from 2010 to 2023. It revealed that while the number of rate filings has remained steady at roughly 10,200 annually, the time required for approval has grown by about 40%. Similarly, the percentage of filings that receive less-than-requested rate changes has risen by 10 points, while the severity of those reductions has increased by 2 points.

Withdrawn filings have also increased by 40%, indicating potential delays or inefficiencies in the approval process. Market concentration, measured by the Herfindahl-Hirschman Index (HHI), has grown by 9%, signaling reduced competition in the marketplace. The study found a notable correlation between underwriting losses and premium shortfalls, suggesting that delays in rate adjustments may contribute to financial instability for insurers.

Despite a 93% increase in direct written premiums for personal auto insurance since 2010, insurers have reported underwriting losses in 11 of the last 14 years. Net combined ratios, which reflect profitability, consistently exceeded 100, meaning insurers struggled to break even.

“There are many factors which can create unexpected underwriting results for personal auto insurance such as weather trends, increasing inflation, and changes in driving behavior. To combat these factors, insurance carriers file necessary rate changes through the different state regulatory environments,” said Dale Porfilio, president of IRC and chief insurance officer at the Insurance Information Institute (Triple-I).

Porfilio added that prolonged regulatory processes are contributing to a less competitive market, creating delays in implementing necessary rate changes to address cost pressures.

The report highlights the need for greater efficiency in the regulatory environment to better align rate filings with market demands and ensure a more competitive and balanced insurance landscape for consumers.

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