WSJ: "Insurers Rake In Profits as Customers Pay Soaring Premiums"

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Consumer advocates say the industry’s rate requests can be a one-way street: policyholders are punished when insurers incur losses, but get little relief when they swing back to profitability.

During the pandemic, for instance, auto insurers raked in outsize profits as people stayed at home and got in fewer car crashes. Only one of the top 10 auto insurers, State Farm, cut rates by more than 10% in the two years through 2021, according to S&P Global Market Intelligence.

Since then, the 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%, according to an S&P report this month. In 16 states, the two-year increase topped 30%, including jumps of 45.5% in Texas and 39% in Ohio.

... One factor in the run-up in insurance stocks: the recent willingness of regulators to allow large rate increases, even in states traditionally seen as tough on the industry. Last month, Allstate won approval for auto-insurance rate increases of 30% in California, 17% in New Jersey and 15% in New York. The company had threatened to stop renewing policies in those states after suffering losses.

“Wall Street assumes that insurers will continue to face little regulatory resistance to rate hikes,” said Heller of the Consumer Federation of America.

Analysts warn that the industry’s outperformance might not last.

S&P’s Zawacki said insurers are coming out of their most difficult period in generations. “Companies are not going to be quick to declare victory,” he said.

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