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State Farm sees post-outbreak auto claims drop up to 50% in some states

The largest personal auto insurer in the U.S. has started lowering its insurance rates because of the COVID-19 pandemic.

The extraordinary impact on miles driven and on reported claims during the pandemic caused State Farm Mutual Automobile Insurance Co. and its affiliates to begin decreasing private auto insurance rates across the U.S., totaling a national average decrease of 11%.

The introduction of a premium adjustment factor will be temporary and "apply to all private passenger auto and motorcycle policies, except for antiques and classics, named non-owner, use of non-owned car coverage, or fleets," according to a review of publicly available rate filings submitted to state departments of insurance.

State Farm does not provide a specific date when the adjustment will end, but has said it fully intends to remove or modify the adjustment at some point in the future.

The drop-off in claim volume for State Farm during the first several weeks of the virus breakout was substantial. Depending on the state where the information was available within the filings, the mutual insurer reported an average daily claim volume from March 29 through May 2 between 26% and 56% lower when compared to the baseline of the first 14 days in March 2020.

As lockdowns began to ease and people started to return to the roads, State Farm's claims volume began to rise, although the insurer expects claims to remain lower than before when the pandemic struck. According to its New York filing, it estimates that its average daily reported claims will be 13% lower when compared to the baseline when the filing becomes effective Aug. 31 for new and renewal business.

The overall rate reduction in New York is 12.6%, with a calculated written premium decrease of $218.5 million. State Farm is the third-largest writer of personal auto insurance in the Empire State, with $1.72 billion in direct premiums written in 2019.

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Texas was the second-largest premium state for State Farm in 2019, with $3.26 billion in direct premiums written. State Farm reduced its rates by over 12% in the Lone Star state, equivalent to a reduction in calculated premium of $397.4 million. Average daily claims were 44% lower versus the baseline.

When compared against the baseline, filings in Georgia, Louisiana, and South Carolina revealed that average daily claims dropped by 45%, 35%, and 30%, respectively.

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Customers in Illinois and Michigan can expect a double-digit decrease in their State Farm auto rates. State Farm will be decreasing rates by 13.7% in Illinois and 11.6% in Michigan. The average daily claim fell by 50% in Michigan.

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Of the filings with reported claim reduction figures, Hawaii represented the largest decline. The Aloha State average daily claim volume for the period of March 29 through May 2 was 56% lower when compared to the baseline.

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