Consumer groups analyzing insurers' underwriting performance from 2022 have figured auto insurers reaped vast amounts of dollars excessively profits due to reduced accidents throughout the lockdowns, and say consumers are still owed billions in additional refunds.
“Insurers selling personal auto insurance reaped windfall profits of at least $29 billion in 2022 as miles driven, vehicle crashes and auto insurance claims dropped due to the pandemic and related government actions,” according to the Consumer Federation of the usa and Center for Economic Justice .
The groups' analysis show that insurers collected $42 billion in excess premiums while refunding only $13 billion in “premium relief” payments to consumers.
“Instead of giving back the COVID windfall to consumers, insurers increased payouts to senior management and stockholders,” the CFA and CEJ said.
“In just about any state, car insurance premiums – by law – can't be excessive,” said J. Robert Hunter, CFA's director of insurance. “The inability or unwillingness of almost all state insurance regulators to enforce what the law states and protect consumers raises serious questions. As we pointed out in letter after letter to insurance regulators throughout 2022, it had been superior that insurers' premium relief was woefully inadequate.”
A overview of insurers' financial statements by CFA and CEJ showed that between 2022 and 2022, auto insurers paid 67.4 cents in claims for each premium dollar collected . In 2022, the insurers' loss ratio dropped to 56.1 cents per dollar of premium, or $33.6 billion less than if their loss ratio had remained at 67.4 as with prior years.
The consumer groups say that the $33.6 billion decrease in claims means $42.1 billion of excess premium charges from a total of about $258.6 billion as a whole personal auto insurance premium. Yet, based on A.M. Best, insurers returned just $13 billion in premium relief, or less than one-third of the pandemic windfall, while pocketing the remaining two-thirds.
The consumer organizations calculated the things they have to say is a “conservative estimate” of what each state's drivers are still owed in terms of premium refunds. Large states like California, Florida and Texas are owed a lot more than $2 billion each, according to the analysis.
Additional personal auto insurance pandemic premium relief needed by state as provided by the Consumer Federation of the usa and Center for Economic Justice.
A separate analysis conducted through the non-profit consumer group Consumer Watchdog found that insurers earned excess profits of approximately $5.5 billion in California alone.
“Newly published 2022 data reveal that accident claims plummeted as cars idled in driveways, but insurance companies didn't reduce rates accordingly,” the audience said in a statement. “As an effect, insurance companies' average return on value – a stride of profitability that includes premiums and investment income – was more than twice what California law allows last year.”
According towards the consumer group, the lower that insurance companies' loss ratios go – the greater of every premium dollar they keep on their own – the higher companies' return on value climbs.
A separate analysis conducted through the non-profit consumer group Consumer Watchdog found that insurers earned excess profits of about $5.5 billion in California alone.
“Newly published 2022 data reveal that accident claims plummeted as cars idled in driveways, but insurance providers failed to reduce rates accordingly,” the audience said inside a statement. “As a result, insurance companies' average return on net worth – a stride of profitability which includes premiums and investment income – was more than twice what California law allows last year.”
According to the consumer group, the lower that insurance companies' loss ratios go – the more of each premium dollar they keep on their own – the larger companies' return on net worth climbs.
Consumer Watchdog is calling on California Insurance Commissioner Ricardo Lara directly to order the insurers to return what's owed to California consumers.
The relationship between loss-ratio and return on net-worth for an insurance provider. Chart provided by Consumer Watchdog.
While the commissioner has issued four bulletins directing insurance providers to refund overcharges, the Department of Insurance allowed insurers to calculate for themselves what they owe. The top 15 auto insurance companies, representing 70 % from the market, have subsequently repaid approximately $1.9 billion for 2022, “less than half of what they overcharged California consumers,” Consumer Watchdog says.
“Asking insurers to calculate their very own refunds hasn't resulted in consumers getting what they're owed,” Carmen Balber, executive director of Consumer Watchdog, said. “Insurance information mill hanging on to billions of drivers' dollars that should be helping Californians return to their feet as we leave the pandemic. The Insurance Commissioner must require companies to refund past overcharges in full, with interest, and make sure minute rates are not excessive moving forward.”
While data on 2022 overcharges isn't yet available, the customer group says that the pandemic continues to affect traffic patterns, and accident rates are still not the things they were before March of 2022, indicating that insurance providers owe consumers vast amounts of additional refunds for the first six months of 2022.
The American Property Casualty Insurance Association was quick to criticize the analysis of the consumer groups, calling it “misinformation.”
“CFA and CEJ are wrong on almost everything within their latest report,” said David Snyder, APCIA v . p ., international and counsel. “The fact is that insurer profits are less than 2 percent of every auto insurance premium dollar. Most what they call profit are expenses accustomed to handle claims, sell and service policies and pay taxes and regulatory fees.”
According to Snyder, while there was an “initial stop by driving in the onset of the pandemic” miles driven have “returned to pre-pandemic levels.” Snyder also pointed out that accident severity has grown since 2022 there is a significant begin fatalities.
“Had unjustified premium cuts been ordered this past year, it might only have put additional upward pressure on rates this season because of the rapid increases in miles driven and also the greater rate of crashes and losses,” Snyder said.
Auto Insurers Reaped Nearly $30 Billion Pandemic Windfall Profit in 2022 as State Insurance Regulators Fail to Protect Consumers
Auto Insurance providers Overcharged California Motorists $5.5 Billion During the First Year of Pandemic, Study Shows
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Featured image: iStock
Additional personal car insurance pandemic premium relief needed by state as provided by the customer Federation of America and Center for Economic Justice.
The relationship between loss-ratio and return on net-worth to have an insurance provider. Chart provided by Consumer Watchdog.