P&C insurers saw a 1.4% growth in net premiums written in 2020, even with all the premium givebacks during the pandemic. But with the continuing pandemic in addition to the increase in risky drivers getting back on the roads and unpredictable weather conditions throughout this year, carriers prepare for the worst with rate hikes and downsizing initiatives across the country.
Auto and home insurance face rate hikes
Due to the pandemic, an increase in accident severity, a string of natural disasters and supply shortages affecting the auto and home insurance markets, carriers have been diligently seeking rate hikes over the past year and a half. Here are a few leading carriers that have hiked rates in the past few months:
Allstate is boosting rates in Illinois by about 2.5% in October, mentioning that it took into account the anomalous effect of the pandemic when setting the new rate. The carrier stated that it would revert back to its old methodology of establishing rates in the future. The carrier also previously cut rates in the state by 5% earlier this year.
American Family increased homeowners rates, getting regulatory approval across 12 states. More than 75% of the projected $58.7 million of this premium growth will come from a single 34.4% rate hike by subsidiary Homesite Insurance Co. in California.
Progressive proposed a 5.8% rate increase in Connecticut but was rejected by state regulators, labeling the amount “excessive.” The insurer also attempted to raise rates in Texas, but the Texas Department of Insurance denied the request, even attempting to call Progressive out for failing to comply with certain requirements in rate change requests from April to July 2021. The carrier successfully raised rates in Illinois by 3%.
GEICO increased auto rates in Illinois by 6% effective in December, the biggest rate increase from the insurer in the state in six years. The carrier proposed a similar rate hike in Connecticut but was rejected, as the state called out the carrier for excluding driving data from the pandemic or beyond. The insurer had a similar conversation with the Texas regulator and explained that it was excluding pandemic-year data because the year was an anomaly. GEICO more recently filed for double-digit auto rate hikes in Virginia, Nevada and Nebraska.
Travelers increased homeowners rates in Texas by 7.6% in June, boosting the carrier’s written premiums by $22.8 million. The carrier also got approval in other states, adding another $9 million to the carrier’s premium income.
Carriers cut down on real estate and employees as the year progresses
In addition, carriers have also been downsizing in the last few months as work-from-home habits press on. With employees working from home and companies deploying company-wide cloud solutions, the need for physical offices doesn’t seem as urgent as pre-COVID. While carriers plan to eventually have employees back in the office by 2022, a handful of insurers have made moves to downsize in the meantime.
Progressive sold its 190,000-square-foot data center in Colorado Springs, CO, to Utah-based Novva Data Centers for $38.5 million as the carrier’s increased use of the cloud lessened the need for its own data facility. Under the terms of the sale, the carrier will still use half of the facility under a lease with Novva.
Travelers announced plans to move out of its leased 150,000-square-foot office space in Hartford, CT, and consolidate office space into properties the carrier already owns. About 1,000 employees will be affected by the decision, and the insurer will try to sublease the office space in the meantime.
State Farm is closing its Bakersfield Operations Center in California by the end of October, letting go of 230 employees in the process. The carrier mentioned plans to exit from 11 other locations in 2017 as a part of its initiative to move employees to the insurer’s headquarters and main hubs. Displaced employees will have the option to apply for open positions within the company.
Allstate cut almost 4,000 jobs in September 2020 as part of its plan to grow its P&C market share and affected about 8% of the insurer’s workforce. The carrier said its cuts and related office closures would come at a restructuring cost of about $290 million.
As the continued uncertainty of the pandemic as well as the unpredictability of climate change and driving patterns pushes insurance companies to adapt both their rates and their business operations, it will be interesting to see how the rest of this year pans out.