Insurance companies made record profits during pandemic, report says

[July 07, 2022]  By Kevin Bessler | The Center Square

(The Center Square) – While your car sat idle in the garage during the pandemic, a consumer group says Illinois insurance companies reaped the benefits.

According to an analysis of Department of Insurance figures by the Illinois Public Interest Research Group Education Fund, the four largest carriers in the state, State Farm, Geico, Progressive and Allstate, charged customers $280 million more than needed to maintain their 2019 profitability.

PIRG director Abe Scarr said after overcharging customers, Illinois’ major insurance companies rewarded top executives with generous bonuses.

“Moments of crisis are revealing,” Scarr said. “Auto insurers took the opportunity provided by the pandemic to charge their customers excessive rates and make windfall profits.”

The data support claims by consumer groups that the premium relief offered by insurers falls far short of reimbursing motorists for the reduction in risk brought about by the pandemic, when miles driven plummeted as a result of pandemic shutdowns.

Insurance groups disagree. They said the data show insurers took appropriate steps immediately following the COVID-19 pandemic shutdowns and issued more than $14 billion in premium reductions as miles driven declined. However, that decline was short-lived, and miles driven quickly rebounded to pre-pandemic levels.

“Providing new premium reductions, as being called for by some groups, when the number of crashes, losses and inflation is increasing would be unwise and counter to the longer-term trends that have existed since the pandemic’s early days,” said Steve Schneider, vice president of state government relations for the America Property Casualty Insurance Association.

Scarr said it is time to give the Illinois Department of Insurance the authority to review rate hikes.

“Ultimately we think we should be a state where insurance rates are reviewed and the Department of Insurance has some input on where rates are set at,” Scarr said.

Scarr notes that California regulators ordered carriers to close the gap after initial pandemic rebates fell short. State Farm then announced that it would provide an additional $400 million in pandemic refunds to its California customers “due to better than anticipated claims results.”

Kevin Martin, executive director of the Illinois Insurance Association, said regulating rates will only drive them up.

“Every state that has some sort of prior approval of rates or rate regulation, I can guarantee from what we have looked at in all of those states, the average premium for what policyholders would have to pay is much higher,” Martin said.

According to an analysis by Crain’s Chicago Business, Allstate was one of the first carriers to issue rebates during the pandemic, providing 15% off premiums for April through June 2020.

Allstate’s reduced rates for motorists were short-lived though. This spring, Allstate raised premiums for its Illinois customers by an average of 12%, one of the largest increases ever.

Insurers across the country are expected to increase rates by an average of about 4.9% this year.

Kevin Bessler reports on statewide issues in Illinois for the Center Square. He has over 30 years of experience in radio news reporting throughout the Midwest.