The US private auto insurance hard market solidified even more in 2023 as each of the 10 largest underwriters raised their premium rates by double digits, compounding substantial hikes in 2022, according to S&P Global Market Intelligence's RateWatch application.
For the majority of the top players, their 2023 effective rate increase was higher than its prior-year calculated change. Farmers Insurance Group of Cos.'s calculated weighted average rate increase of 17.6% was the highest among the nation's 10 largest private auto insurers. The California-based insurer's large 2023 rise in rates was about 3 percentage points higher than the 14.5% effective rate change in 2022.
Overall, Farmers Insurance raised its private auto rates by double digits in 43 states in 2023. The calculated weighted average increase of 30.4% across all of its units in Nebraska was the highest for the company. Among the states reflecting an effective rate change below 10%, North Carolina was the lowest at 1.8%. The other states were New Jersey, Vermont and Colorado at 9.6%, 9.2% and 8.6%, respectively.
The insurer did not have rate change requests in Alaska, the District of Columbia or Hawaii during the most recent full year.
The rate information is sourced from disposed private passenger auto rate filings collected by S&P Global Market Intelligence that are submitted to the Department of Insurance in various states. The analysis is limited to rate filings of each state's 10 largest private auto underwriter based on 2022 direct premiums written plus any of the country's 10 largest private auto underwriters outside the state's top 10. The reports are based on rate filings entered into the database through Dec. 29, 2023.
The effective rate change is the average of the cumulative changes by renewal business effective date for each insurer weighted against respective calendar year direct premiums written reported within the National Association of Insurance Commissioners property and casualty regulatory statements. For year-to-date 2023 figures, 2022 direct premiums written were used. Read more about S&P Global Market Intelligence's RateWatch.
State Farm Mutual Automobile Insurance Co.'s large growth in its private auto direct premiums written through the first nine months of 2023 has been aided by its material rate increases over the past couple of years. The Illinois-based insurer's private auto weighted average rate increase was 16.0% in 2023, which followed a 9.9% increase during the previous year.
The insurer's three largest effective rate increases during the most recent year occurred in Nevada, Minnesota and Georgia, at 34.7%, 29.9% and 28.3%, respectively.
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For Berkshire Hathaway Inc.'s Geico Corp., its 2023 effective rate change of 10.1% was the lowest among the group; however, its 17.2% effective rate change in 2022 was the previous year's highest.
In 2023, Geico received approval to raise rates in 43 states, including the District of Columbia, with 29 of the increases being greater than 10%. The country's third-largest private auto insurer's calculated increase of 53.8% in Nevada was highest for the top players in the space.
Back-to-back years with large rate increases
After muted premium rate changes between 2018 and 2021 within the private auto insurance market, the US industry saw back-to-back years of double-digit national average rate increases. For 2023, 43 states and the District of Columbia reflected an effective rate change greater than 10%, pushing the calculated nationwide effective change of 14.0% during the year. Only 26 states had a double-digit effective rate increase in 2022, translating to a calculated national average increase of 11.4%.
Nevada stands atop the nation with the largest effective rate increase of 28.3% in 2023, followed by a 19.8% rise in Minnesota and a 19.7% increase in Washington.
The states with the lowest weighted average effective increase were Hawaii (3.8%), North Carolina (4.3%) and Colorado (4.5%).
When combining substantial increases in back-to-back years, Texas has the highest cumulative rate increase of 45.5% over the previous two-year period with Ohio having the second-largest increase cumulative change of 38.9%.
There were 14 other states with a two-year calculated cumulative change greater than 30%: Arizona, Illinois, Tennessee, Minnesota, Oregon, Nevada, Georgia, Utah, Maryland, Missouri, Virginia, Oklahoma, Kansas and Pennsylvania.
Only Hawaii and North Carolina had a cumulative effective change lower than 10%, at 4.4% and 8.2%, respectively.
