The National Association of Insurance Commissioners (NAIC) “Profitability report by line by State in 2020 – Edition 2021” States that private auto insurers across the country collected more than $ 250.6 billion in premiums last year and are asking customers for more money by 2022.
“Auto insurers have made unexpected huge profits and so this has been described by the Consumer Federation of America and the Center for Economic Justice as not only windfall profits but also excess premium profits,” Erica Eversman said, consumer representative of the NAIC and the automotive industry. Founder of the Education & Policy Institute.
The goal of the NAIC report, released on December 21, is to estimate and allocate P&C insurance profitability by state and by line of business, which, combined with other information, can be used to analyze in more detail the competition and the market. performance, according to the report.
The NAIC also states that the data used in the report was obtained from annual financial statements and exhibits filed with the NAIC by 2,870 property and casualty insurers and it is estimated that over 95% of premiums written in the United States are represented.
The NAIC cautions that the report cannot and should not be used to determine whether current rates are adequate to cover future costs.
Investment gains on state insurance transactions ranged from a high of 17.1% in Michigan to a low of 1.7% in Arkansas, North Dakota and Guam. However, the report notes that in 2019 and 2020 Michigan’s auto liability losses declined significantly, possibly due to Michigan’s no-fault reform in which companies reduced their reserves for the current mandatory fee schedule. for all proceedings rendered on or after July 2, 2021. It also recognizes “reporting anomalies” from Michigan Catastrophic Claims Association (MCCA) data.
The return on net worth nationwide was 10.2%, up from 6.9% in 2019 and 4.8% in 2011. The US state with the highest return on net worth was North Dakota at 22.9% while Florida had the lowest at 3.7%. Only one other state, Mississippi, had a return of less than 5% while 27 states had returns between 10 and 15%.
A CFA and CEJ analysis of US Auto Ins 2020 profits says a $ 29 billion windfall deserved more regulatory attention as Americans struggled through the COVID-19 pandemic. Referring to data from the NAIC, the CFA says in the report that 2020 auto premiums “have remained stable while losses have declined significantly.”
When insurers have leftover money after keeping some of it set aside to cover pending claims, they are supposed to return the money to policyholders, Eversman said.
“We know a lot of that didn’t happen last year,” she said. “Auto insurers made $ 42 billion in profits. They returned $ 13 billion to their policyholders. They basically kept $ 29 billion. This has been a subject of huge contention over the past two years. “
Despite the windfall, Eversman said insurers are pointing fingers at consumers for premium increases because they believe “consumers cannot be trusted to do the right thing.”
“They asked for increases in 2021 and are asking for them in 2022 because the position of auto insurers is that auto parts are hard to find, which is not wrong,” Eversman said. “As a result, vehicles that can be repaired are now often in repair shops waiting for parts and therefore insurers are paying much more than expected in car rental costs and their total loss costs are higher because the vehicles are worth a lot more at the moment. “
In its work with dealerships, Eversman said the vehicles sell for between $ 4,000 and $ 8,000 above the sticker price. However, insurers claiming the higher premiums are due to increased repair and labor costs are overstated, she said.
One such example can be seen in recent Rhode Island legislation as the American Property Casualty Insurance Association argues before lawmakers against the overturning of Governor Dan McKee’s July 16 veto on the Unfair Claims Practices Act (H6324 and S870 ) which would require insurers to pay for surcharges and other costs related to paint and body shop equipment and sublease expenses. The APCIA has claimed that a waiver of McKee’s veto could result in higher auto insurance premiums.
Rhode Island insurers in 2020 earned nearly $ 10 million in private passenger car premiums, resulting in a 10.6% return on net worth, according to the NAIC report.
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Referring to data from the NAIC, the CFA says in the report that 2020 auto premiums “have remained stable while losses have declined significantly.” (Screenshot of the CFA report)
NAIC reported that Rhode Island insurers had a return on net worth of 10.6% in 2020 (screenshot from NAIC report)