Just weeks after implementing one series of rate increases on Texas private-passenger auto business, The Allstate Corp. and The Progressive Corp. plan another round of rate hikes that would rank among the Lone Star State's most significant on record.
Texas private auto underwriting results for Progressive County Mutual Insurance Co., like those for the overall organization on a countrywide basis, deteriorated markedly in 2021 from historically favorable 2020 levels according to new data contained in two Feb. 3 rate filings for double-digit rate increases across two separate programs. Lofty actuarial indications provided by Allstate Fire & Casualty Insurance Co. in its Feb. 3 rate filing for a double-digit hike on its Texas business provide a sense of the gravity of the situation in the second-largest U.S. private auto market.
The size and cadence of these actions provide more support for the notion of an abrupt, broad-based hardening in private auto rates in response to inflation in vehicle repair and replacement costs driven by unprecedented supply chain disruptions.
Progressive County Mutual filed to raise rates by 15.0%, overall, on its agency channel business and 11.3% on its direct channel business, effective the following day for new business and on March 10 for renewals. The company's last round of hikes in respective amounts of 8.4% and 4.8% took effect on Nov. 25, 2021, on a file-and-use basis in what marked the third time it moved to raise rates in a six-month span. A dispute over the previous two filings between the insurer and the Texas Department of Insurance was resolved in January.
The Progressive affiliate reported loss and DCCE ratios of 72.5% and 70.8%, respectively, in its agency and direct channel business in what the respective filings labeled as calendar year 2021, up from 54.1% and 52.4% in 2020. The combined result of 71.8% marked an increase of 18.4 percentage points from 2020 and 8.2 percentage points from 2019. Only once since the start of the century, according to a review of data contained in archived Progressive County Mutual rate filings, was the ratio higher at 73.6% in 2016. These results differ somewhat from those reported by the insurer on the Texas state page of its past annual statements as Progressive County Mutual files motorcycle, motor home and travel-trailer rates under separate covers.
Meanwhile, Allstate Fire & Casualty, less than two months removed from the effective date of an 8.5% file-and-use increase on Texas private auto renewals, filed for a 12.0% overall hike on Feb. 3. The rate increase would take effect Feb. 14 for new business and March 31 for renewals.
All three of the filings carry historical significance for the individual carriers and the Texas private auto market as a whole.
The Progressive County Mutual agency and direct channel actions would rank as the first- and seventh-largest Texas private auto rate increases by an individual carrier in the 15 years for which S&P Global Market Intelligence has comprehensively obtained such filings in that state based on the written premium change implied by the filings of $330.2 million and $159.7 million, respectively. Allstate Fire & Casualty's increase would place fifth largest on the same basis with an implied written premium change of $247.6 million.
The largest increases prior to the Progressive County Mutual filing based on implied written premium change had been from State Farm Mutual Automobile Insurance Co. in 2017 and GEICO County Mutual Insurance Co. in a filing submitted by the Berkshire Hathaway Inc. affiliate in August 2021 and due to take effect for renewals on March 7. Progressive County Mutual, State Farm Mutual Automobile, GEICO County Mutual and Allstate Fire & Casualty ranked as the top four individual carriers in the Texas private auto market on a stand-alone basis in 2020.
The urgency of now
While the magnitude of the recent actions stands out, a series of Texas private auto rate increases in succession by the same carriers is not without precedent.
As adverse claims frequency and severity trends swept across the industry in 2015 and 2016, according to historical data contained in the latest filings, Progressive County Mutual implemented 10 rate increases in the agency and direct channels business during a 28-month stretch through October 2017. But none of them were larger than 5.0%. Allstate Fire & Casualty last raised Texas private auto rates by a higher amount in January 2008, not including filings specifically pertaining to its trailers program, with a 12.4% increase.
Allstate Property-Liability President Glenn Shapiro said during Allstate's fourth-quarter 2021 earnings conference call on Feb. 3 that the company would pursue rate increases at a "very fast pace," including in some of the same states where it had already taken action as "new data and new trends" come to light.
Allstate Fire & Casualty provided an actuarial indication of rate need across coverages of 37.0%, including indications of 102.7% in the bodily injury coverage and 83.5% in the uninsured/underinsured motorist coverage. That represents the highest indication in any state in at least the past decade on a rate filing for an Allstate-brand private auto program with at least $50 million in associated written premium. (Note that this is limited to rate filings obtained by S&P Global Market Intelligence where the indication was provided in templated form.)
Shapiro said during the call that costs in the casualty coverages had risen due to the effects of more accidents occurring during the pandemic at higher rates of speed, which leads to more severe injuries, additional medical consumption and higher attorney representation rates. In Texas, data reported by the state's Department of Transportation showed a 7.5% increase in motor vehicle traffic fatalities in 2020, despite a 9.6% decline in annual miles traveled.
The consolidated combined ratio for Allstate-brand auto business spiked to 103.9% in the fourth quarter of 2021 and 95.0% for the full calendar year, respectively, from 85.2% and 85.9% a year earlier. The Progressive holding company reported a combined ratio across its personal vehicle businesses on a consolidated basis of 95.4% in 2021, a result that was aided by a highly favorable first quarter. Direct channel combined ratios exceeded 100% three times during a four-month, midyear 2021 span. Prior to June 2021, it took a period of 108 months for the direct channel combined ratio to exceed 100% three times.