The National Association of Insurance Commissioners “Report on Profitability by Line by State in 2022 – 2022 Edition” states private passenger auto insurers countrywide collected a lot more than $250.6 billion in premiums this past year and are requesting more money from customers entering 2022.
“The auto insurers made just enormous amounts of unexpected profit so it continues to be described by Consumer Federation of America and also the Center for Economic Justice as not just windfall profits, but excess premium profit,” said Erica Eversman, a NAIC consumer representative and Automotive Education & Policy Institute founder.
The purpose of the NAIC report, released on Dec. 21, is to estimate and allocate profitability in Property & Casualty Insurance by state by type of insurance, that when coupled with additional information can be used to further analyze competition and market performance, based on the report.
NAIC also states within the data utilized in the report was from annual financial statements and exhibits filed using the NAIC by 2,870 P&C insurers and it’s estimated that in excess of 95% from the premiums written in the U.S. are represented.
The NAIC warns the report can’t and shouldn’t be employed to see whether current minute rates are adequate to cover future costs.
Investment gains on insurance transactions by states 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 2022 and 2022, Michigan auto liability losses incurred decreased significantly, likely due to Michigan's no-fault reform in which companies reduced their reserves for that mandatory fee schedule effective on all procedures rendered on or after July 2, 2022. It also recognizes “reporting anomalies” from Michigan Catastrophic Claims Association data.
Return on value countrywide was 10.2%, up from 6.9% in 2022 and from 4.8% in 2011. The U.S. state with the highest return on value was North Dakota at 22.9% while Florida had the cheapest at 3.7%. Only one other state, Mississippi, had a return below 5% while 27 states had returns between 10-15%.
A CFA and CEJ Analysis people Auto Ins 2022 profits claims a $29 billion windfall deserved more regulatory attention as Americans struggled through the COVID-19 pandemic. Referencing NAIC data, the CFA states within the report that 2022 auto premiums “remained stable while losses fell dramatically.”
When insurers have leftover money after keeping some reserved to pay for pending claims they’re supposed to return the cash to the policyholders, Eversman said.
“We know that the significant amount of that didn't happen this past year,” she said. “The auto insurers made $42 billion in profits. They returned $13 billion for their insureds. They basically kept $29 billion. That has been an issue of enormous contention over the last year to two years.”
Despite the windfall, Eversman said insurers are going the finger at consumers for premium increases because they think “consumers can’t be trusted to act properly.”
“They requested increases in 2022 and are requesting them in 2022 because the auto insurers’ position is that automobile parts are difficult to source, which isn't untrue,” Eversman said. “Accordingly, vehicles that may be repaired are actually often sitting in repair facilities waiting on parts and so the insurers are spending wild a lot more than anticipated in rental car costs which their total loss costs are higher because vehicles count a lot more right now.”
In her use dealers, Eversman said vehicles are being sold for $4,000 to $8,000 over car or truck. However, insurers claiming that higher premiums are due to repair and labor costs increasing is exaggerated, she said.
One such instance can be seen in recent Rhode Island legislation because the American Property Casualty Insurance Association make their cases to legislators against overriding Gov. Dan McKee's July 16 veto from the Unfair Claims Practices Act that would require insurers to cover markups along with other charges associated with auto body shops' paint and material and sublet expenses. APCIA claimed that an override of McKee's veto could lead to higher auto insurance premiums.
Rhode Island insurers in 2022 earned nearly $10 million in private passenger auto premiums resulting in coming back on net worth of 10.6%, according to the NAIC report.