Progressive's Fla. rate cut heralds return of private auto competition

Significant improvements in private-passenger auto insurance underwriting results in 2024 have triggered changes in the competitive environment that have begun to manifest themselves in the third-largest US state.

Longtime rivals The Progressive Corp. and Geico Corp. plan to implement dueling rate decreases for renewal business in Florida later in January in a move that underscores a return to normalcy after a three-year stretch of soaring loss-cost inflation and repeated rate increases across geographies.

Both Progressive and GEICO, which have delivered stellar private auto results in recent quarters, increased spending on advertising campaigns in 2024 as they pivoted from retrenchment to growth. Progressive's recent expansion has vastly exceeded GEICO's, with a year-over-year growth rate in personal auto policies in force in November 2024 that reached levels the company had not experienced in decades. And its Florida filings also carry historical significance as the largest rate decreases it has proposed in the Sunshine State in more than 17 years.

We do not anticipate the emergence of unrestrained price competition in 2025 for a variety of reasons, including significant differences in the industry's return to rate adequacy in various states and lingering concerns about inflationary pressures. But the magnitude of rate increases should continue to recede and the frequency of rate decreases should increase. S&P Global Market Intelligence's P&C Rate and Product Filings Trend Analysis and Histogram template shows that approved private auto rate decreases with an effective date in the first quarter of 2025 constitute 17.9% of non-zero private auto rate filings for that period. Their share of first-quarter 2024 rate filings was just 4.0%.

Progressive American Insurance Co. and Progressive Select Insurance Co. indicated in submissions dated Dec. 19, 2024, that they planned to implement rate decreases on a use-and-file basis of 7.4% and 8.8%,respectively, on Florida books of private auto business with earned premiums of $3.53 billion and $3.72 billion. The filings had proposed effective dates for renewal business of Jan. 16.

GEICO Casualty Co. and GEICO Choice Insurance Co. on Jan. 28 will implement rate decreases of 3.5% and 3.7%, respectively, on books of standard auto business that constitutes approximately 30.2% of the group's in-market earned premiums. According to the companies' filing, the decreases were driven by a significant decline in their actuarial indication of rate need for the collision coverage. GEICO Casualty had implemented a 7.6% overall rate decrease in June 2024 on the same book of business.

"After consecutive years of increasing loss costs requiring rate increases, we have observed material improvement in our expected loss costs across multiple coverages," Progressive American said in its filing. "We are reacting to this by reducing rates to reflect our expectation of this new, lower expected future loss cost for the state."

The Progressive group, largely due to business written by the independent agency-focused Progressive American and the direct channel-driven Progressive Select, ranked as Florida's No. 1 private auto insurer in 2023 with share of nearly 22.9%. GEICO parent Berkshire Hathaway Inc. ranked second with share of 21.1%.

Progressive CEO Tricia Griffith, writing in her third-quarter 2024 letter to shareholders attached by exhibit to the company's most recent Form 10-Q filing, said that the company had achieved "rate adequacy in most states" in its private auto business. The filing further noted that Progressive had nine states where it had "small" rate decreases during the third quarter of 2024 while it boosted rates by less than 1% in the aggregate.

Progressive American previously filed to lower Florida private auto rates by 2.3% for renewal business, effective in February 2024. Progressive Select last filed for a Florida private auto rate decrease during July 2020. Its latest filing represents the largest Florida private auto rate decrease by a Progressive subsidiary since a Progressive American submission in October 2007 for a 15% reduction that was tied to the short-lived sunset of the state's motor vehicle no-fault law. Excluding recreational vehicle business, we have no record of a larger ordinary course Florida private auto rate reduction by a Progressive company in the more than 23 years we have been collecting rate filings from that state. Both Progressive American and Progressive Select filed for multiple large rate increases on their Florida private auto books through 2022 and 2023.

Florida is a critically important state for both Progressive and GEICO as it accounted for 14.4% and 16.5% of their total private auto direct premiums written in 2023. But the significance of the decreases extends beyond Florida's borders.

Aside from the months after the onset of the COVID-19 pandemic, Progressive has rarely moved to cut private auto rates by more than 6% in a single filing during the past two decades. A rate decrease of nearly 8.0% in Iowa, effective in 2006, represents one such exception to that rule.

And as demonstrated by a year-over-year growth rate in personal auto policies in force that spiked to 21.2% in November 2024, Progressive has not needed to rely on significant rate decreases to attract meaningful amounts of new business.
 

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.