GEICO, Allstate to Raise Auto Insurance Premiums

By | May 4, 2015
geico

GEICO, which “everybody knows” saves drivers 15 percent on auto insurance, said it will raise its auto premiums after underwriting results declined in the first quarter.

The giant direct writer said its underwriting profit for the first quarter was $160 million, a decline of $193 million compared to the first quarter of 2014.

In the first quarter of 2015, GEICO experienced increases in claims frequencies and severities in several of its major coverages and its loss ratio increased to 80.1, compared to 75.8 in 2014.

“As a result, we are implementing premium rate increases as needed,” the company said in its most recent SEC filing.

Premiums written in the first quarter of 2015 were $5,886 million, an increase of 10.2 percent compared to 2014.

Losses and loss adjustment expenses incurred in the first quarter of 2015 were up 16.6 percent. Underwriting expenses were up 9.5 percent.

“The automobile insurance business is highly competitive in the areas of price and service. Some insurance companies may exacerbate price competition by selling their products for a period of time at less than adequate rates. GEICO will not knowingly follow that strategy,” the management said in its year-end 2014 filing.

The company said that a result of “an aggressive advertising campaign and competitive rates,” voluntary policies-in-force have increased about 39 percent over the past five years.

According to SNL, GEICO spends more on advertising— $1.18 billion in 2013– than any other property/casualty insurer and has been the biggest spender for years.

Allstate Also

GEICO isn’t alone. Allstate, the largest U.S. publicly traded seller of auto and home insurance, said it too would be raising its auto insurance rates, even though its first-quarter profit rose 13 percent.

While profit improved in its homeowners business, underwriting income from auto coverage fell 48 percent to $144 million.

“There are more accidents now over the last couple of years than there have been because economic activity has gone up” and more people are driving,” said Chief Executive Officer Tom Wilson. “We and other people have been raising our rates to account for that.”

Allstate said price increases in auto insurance originally planned for later in 2015 will be implemented sooner.

Insurer Rankings

GEICO was ranked the second largest private passenger auto insurer, behind State Farm, in the United States in terms of premium volume in 2013 by SNL. According to A.M. Best data for 2013, the five largest automobile insurers have a combined market share of 52 percent, with GEICO’s market share being approximately 10.4 percent. Now, GEICO management said it believes that GEICO’s current market share has grown to approximately 10.8 percent.

 2014 Year

For the full year 2014, the auto insurer reported written premiums of approximately $21 billion, an increase of 9.8 percent compared to premiums in 2013. The increase was attributable to an increase in voluntary auto policies-in-force of 6.6 percent and increased average premium per policy.

The loss ratio for 2014 was 77.7  compared to 76.7 in 2013, while underwriting expenses in 2014 increased seven percent to $3.4 billion. The increase reflected the increased policy acquisition costs. The expense ratio was 16.6 in 2014 and 17.2 in 2013.

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Latest Comments

  • August 11, 2016 at 1:03 am
    Mark says:
    Some of those policies sorely lacking in coverage are peddled by independent agents just looking for the sale, including lots of those Trusted Choice agents. In fact, independ... read more
  • August 11, 2016 at 1:01 am
    Mark says:
    That's because people who own homes are generally more responsible than renters. In addition, low income does not equal worse credit. Irresponsible behavior and not managing y... read more
  • May 20, 2016 at 9:59 am
    InsuranceCommentary.com says:
    The national profitability of an insurer may have nothing to do with YOUR profitability, that of your geographical area, experience with your type of vehicle(s), and on and on... read more
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