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Commissioner: Allstate exploits law's loophole to raise rates in Georgia
Covington traffic
Afternoon traffic on U.S. Hwy. 278 in Covington. - photo by Tom Spigolon

Georgia's Insurance and Safety Fire Commissioner says Allstate "has chosen to exploit a loophole in state law" and filed an overall statewide vehicle rate increase of 25% on Georgia policyholders without review by the commissioner's office.

This rate increase will go into effect for new Allstate Property & Casualty Co. customers on Sept. 12, while current customers will see the increase on their renewals beginning Oct. 16, said Commissioner John King.

King said he was "angry and disappointed that Allstate has chosen to exploit a loophole in state law to implement such a substantial increase in costs on hardworking Georgians when families are already struggling with historic inflation everywhere from the gas pump to the grocery store.”

“This latest increase means Allstate has now bypassed our office to raise overall rates in Georgia by 40% in this calendar year alone," he said. 

"In response, I have begun conversations with our legislative leaders regarding changes to state law to give our office additional authorities to protect consumers from these types of inexcusable actions.”

Under Georgia’s dual rate filing system governing automobile insurance rates established in state law, the Insurance Commissioner only has the authority to approve or disapprove minimum limits policy filings, while all other filings can go into effect immediately under what is known as “file and use” — which is the category Allstate's latest rate increase falls into, King said.

"The Office of Commissioner of Insurance encourages Georgia policyholders to reach out to Allstate to discuss the reasons for the increase and the options available to them," a news release stated. 

Allstate said in a statement, "Even though inflation and other factors are causing auto prices to rise, customers will continue to get competitive prices with Allstate and can save money for driving safely using Drivewise."

Company officials referred to a report from the Insurance Information Institute (III) which stated personal auto insurance premiums returned to pre-pandemic levels earlier this year and existing trends are putting upward pressure on rates.

III spokesman Michael Barry said while Georgia is one of many states to have a "file and use" system for rate filings besides filings involving minimum required liability limits, auto insurers must offer an actuarial justification to state insurance regulators when submitting rate filings under the system.

Individual auto insurance premium rates are calculated based on a range of factors, such as the vehicle’s make and model, the policyholder’s driving record and the vehicle’s location, among others. Yet an auto insurer’s claims payout experience in each state also is considered when regulators assess an insurer’s rate filing, the III reported.

“Auto insurers are seeing the frequency and severity of automobile accidents rise quickly as drivers return to the nation’s roadways,” said Sean Kevelighan, CEO of the Institute. “After these accidents occur, the claim payouts are higher due in part to the higher price of auto replacement parts.” 

Pandemic-related supply chain and labor disruptions also exacerbated parts cost inflation, he said.

“Having examined recent auto insurance industry trends, (the III) found auto premiums have not kept pace with inflation — especially when it comes to auto replacement part costs,” Kevelighan said.

For example, the combined ratio, the percentage of each premium dollar an insurer spends on claims and expenses, rose to nearly 100% in the personal auto insurance market nationwide in 2021. In other words, U.S. auto insurers spent about a $1 on claims and expenses last year for every $1 these same insurers collected in premiums.

At the beginning of the COVID-19 pandemic in the spring of 2020, U.S. auto insurers soon thereafter cumulatively returned about $14 billon to policyholders in the form of cash refunds and account credits in anticipation of fewer accidents due to reduced driving. That was the case briefly, but the frequency and severity of auto accidents quickly grew, even with fewer cars on the road, the Institute reported.

The Institute also cited information from the National Highway Traffic Safety Administration (NHTSA) which said auto accident fatalities increased as well after a four-decade downward trend. 

In 2020, 38,824 deaths occurred on U.S. roads, the most since 2007. NHTSA noted in 45% of fatal crashes, the driver was engaged in at least one of the following risk behaviors — speeding, alcohol impairment or not wearing a seat belt.