Emerging trends in claims frequency and driving patterns are giving a number of private auto insurers pause before they commit to additional policyholder credits.
Subsidiaries of at least 13 of Michigan’s 15 largest private-passenger auto insurers at the group level exercised their option under a July 8 Department of Insurance and Financial Services order to submit actuarial justification as to why they believe additional refunds are not currently warranted.
Progressive Corp., Michigan’s largest private auto insurer, showed that weekly changes in incoming other-than-comprehensive claims for June averaged an increase of 1% relative to the week beginning March 8, and it rose over the course of the month. State Farm Mutual Automobile Insurance Co. highlighted a pending filing for a double-digit Michigan rate decrease as its mechanism for accomplishing the goals of the department’s order.
Other large Michigan writers highlighted a return to normal driving activity as they opted against issuing additional premium credits.
The group led by Auto Club Insurance Association reported that the decline in miles driven in Michigan as measured by a third party was “nearly disappearing” by the end of June. While the group experienced a “small reduction” in losses in June relative to its plan, it is opting to proceed with caution given the potential for delays in claims reporting. Auto-Owners Insurance Co. Inc., citing a “notable difference in driving behavior” in June relative April and May, said that an additional refund “is not warranted at this time.” Citizens Insurance Co. of the Midwest put claims frequency for the June accident month at 9.2%, up sharply from 3.8% and 5.6% in April and May.
“It is evident that driving activity has returned to pre-quarantine levels in June,” said the Hanover Insurance Group Inc. subsidiary in a filing.
Various members of the Farmers Insurance Group of Cos. reached similar conclusions.
Farmers Insurance Exchange and an affiliate put their reported claims frequency at 23.8% in June, above the levels they experienced in each of the four preceding months. Bristol West Preferred Insurance Co., a nonstandard auto insurance member of the Farmers Group, said its average number of claims per week in Michigan had increased by 4.8% in June compared to the period from Dec. 31, 2019, through March 23.
Reported Michigan claims for the group led by United Services Automobile Association declined by only 6.8% on a year-over-year basis in June as compared with a reduction of 34.6% in May.
Berkshire Hathaway Inc.’s GEICO Indemnity Co. said that its claims frequency fell by about 25% in June versus a reduction of nearly 50% in the initial weeks of the pandemic; it expressed concern about rising severity in the liability and property damage coverages.
Not only have some carriers reported a return towards pre-pandemic levels of claims frequency, at least one insurer told the Michigan regulator that its volume had increased substantially during the pandemic.
The nonstandard “Shield” program of USA Underwriters said April and May claims frequency surged by 63% and 34%, respectively, over March levels. It also experienced an influx of late reported claims, particularly from the month of May. While USA Underwriters said it previously issued a 10% refund essentially as a “good faith” gesture, it cautioned that further refunds “could harm the economic structure of the program.”
Subsidiaries of Hartford Financial Services Group Inc. represented the lone entities out of the top 15 groups to indicate that they would provide additional premium credits beyond those they issued to policyholders in the spring. The company announced the extension of its 15% credit into the month of June on July 7.
Several companies that hold relatively small shares of the Michigan market also indicated they intend to provide additional credits.
Amica Mutual Insurance Co., which offered 20% refunds to Michigan customers for April and May, extended 5% refunds for a four-month period from July through October. The company said that losses for the calendar year remain “lower than planned,” even though they have increased from spring levels. It is offering refunds of up to 10% on a nationwide basis for that stretch.
Central Mutual Insurance Co. intends to issue a 14.9% premium reduction for the period from March 23 through June 30 in August, less amounts it already paid out in July.
A spokeswoman for the Michigan regulator said that the department is currently reviewing filings submitted under the order.