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Big 4 auto insurers chased rate hikes out west, down south

The big four U.S. auto insurers pursued larger and more impactful private-passenger auto rate increases in the south and west while claiming more modest rate hikes in northeastern and midwestern states in 2017, according to an S&P Global Market Intelligence analysis.

GEICO Corp. raised nominal rates by a weighted average of more than 5% in eight western states during the year, a shift from its focus on lower rate increases in 2016. GEICO received approval for a weighted average rate increase of 12.02% in Washington on its $408.7 million book of personal auto business there. The rate increase could lead to a $49.1 million calculated impact on written premiums.

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California accounted for the most impactful rate increases approved in the personal auto industry in 2017 across the U.S. Market leader State Farm Mutual Automobile Insurance Co. raised rates by a weighted average of 6.90% in the state during the year, leading to a potential written premium impact of $463.4 million. In 2016, State Farm held an 18.25% share of the national private auto market and a 14.47% market share in California, according to statutory data.

Each of the four major U.S. auto insurance companies raised rates in California by a weighted average of between 5.5% and 7%. The four companies could see a collective calculated increase of $988.2 million in written premiums, based on the rate changes approved and the written premiums in each program.

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Texas regulators approved the most impactful rate increases among southern states during the year. The nominal rate increases ranged between weighted averages of 1.6% for Progressive Corp. and 3.4% for State Farm, but due to the large volume of business underwritten in Texas, the written premium impact for all four companies could total more than $900 million.

Progressive raised nominal rates significantly in a number of southern states, even as it bucked the market trend by lowering rates in some key markets in 2017. It received approval for weighted average rate increases of 14.7% in North Carolina and 11.7% in Virginia.

The largest nominal rate increases were approved in Louisiana, where auto insurers had already faced mounting losses due to flooding over the past two years. Flash floods may become a significant factor again when auto rates are renewed for 2018 in the wake of catastrophic hurricanes in southeastern Texas and in Louisiana. Even before Hurricane Harvey, the Pelican State's private auto loss ratio had deteriorated sharply to 92.43% in 2016 from 71.95% a year earlier.

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State Farm and Allstate Corp. received approval for the most impactful rate increases in the northeastern and midwestern U.S. State Farm raised rates by weighted averages of 3.4% and 2.2%, respectively, in Ohio and Michigan. It could potentially realize written premium impacts of $158.3 million in Michigan and another $128.6 million in Ohio. For Allstate, a 2.7% weighted average rate increase in Michigan may lead to an estimated $93.9 million increase in written premiums.

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Weighted average rate change is calculated by dividing collective calculated premium change by collective rate filing written premium. If a filer received approval for multiple rate filings during the year, only the latest rate filing written premium is aggregated in the denominator.

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Click here for a template providing rate changes for a select entity, state or type of insurance over a selected time period. With this template, users can also view information on each filing along with key metrics related to premiums, approval time and affected policyholders.

Click here for a webinar with information on the resources SNL has available regarding rate filings.