30 Aug, 2022
Progressive's auto premiums in Texas to soar $1B+ after series of rate hikes
The Progressive Corp. has raised its personal auto rates in Texas by about 36% over the course of the last two years, which is expected to boost the insurer's premiums by more than a billion dollars.
Personal auto underwriters in the U.S. have been contending with soaring claims costs from the impacts of inflation and changed driving habits of their policyholders. Insurers ultimately seek to pass on those higher costs through higher rates to improve profitability in the business line.
5 distinct rate hikes for Progressive in Texas
While Progressive is not the only insurer increasing rates in Texas, it has been more aggressive than many of its competitors. The insurer's single underwriting unit for personal auto business in the Lone Star State, Progressive County Mutual Insurance Co., has been boosting rates across its book of business. Since the start of 2021, the insurer has hiked rates on agency and direct channel business five separate times, according to a review of rate filings.
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Based on the renewal business effective dates of the filings, the first overall rate increase of 1.1% occurred during the second quarter of 2021. The insurer then further ratcheted up rates during the next three consecutive quarters, culminating with its highest increase of 13.6% during the first quarter of 2022. A couple of additional filings with a renewal date of July 14 further increased overall rates by another 5.8%.
In aggregate, the written premium change of the 10 separate rate filings, five each for Progressive's agency and direct channels, equates to an additional $1.12 billion of additional personal auto premium in Texas.
Direct incurred loss ratio remains elevated
Even with the additional premiums collected from the rate hikes, Progressive County Mutual's personal auto direct incurred loss ratio remained elevated during the second quarter of 2022. The insurer's direct incurred loss ratio in Texas was 70.8% during the most recent quarter, higher than the group's national personal auto direct incurred loss ratio of 68.3%.
Progressive County Mutual did see an improvement in its incurred loss ratio when compared to the prior-year period but was still worse than the second quarter of 2019 when it was only 65.2%.
Several of Progressive's competitors, which also have insurance subsidiaries that only write business in Texas and account for the bulk of the group's personal auto premiums in the state, had elevated incurred loss ratios during the second quarter. Of those three units, Berkshire Hathaway Inc.'s GEICO County Mutual Insurance Co. had the highest direct incurred loss ratio at 94.8%.
The GEICO business was followed by Liberty Mutual Holding Co. Inc.'s Liberty County Mutual Insurance Co. at 77.4% and Farmers Insurance Group of Cos.'s Farmers Texas County Mutual Insurance Co. at 73.4%.