RI Auto Insurers Approved for $16MM Increase in Premiums; 2016 Expected to Be Much Higher

Rhode Island Auto insurance companies are approved for an increase in premiums, which means higher insurance costs for Rhode Island carowners in 2016.

In 2015, Rhode Island companies requested rate increases that would impact 450,000+ auto insurance policyowners in the state. These changes are expected to generate a net $29MM more in revenue from 2015 through 1Q 2016 across most of the top 10 carriers - roughly a 5% increase over premiums written in 2014. We estimate that there will be more to come in 2016. Rate increases in 2016 are on pace to be greater, with $13MM already requested in 1Q alone - 79% of what was approved for the full year of 2015.

Auto insurance premium revenue increase by rate-change effective quarter.

2015 Approved Rate Changes

Nine Rhode Island auto insurance carriers earned an additional $16MM in premium revenue in 2015 as a result of the approved rate changes. These nine carriers included six of the 10 largest RI auto insurance underwriting insurance corporations and their affiliates. Together they insured 67% of all RI motorists, and the filed changes this year affected almost 302,000 policies. Here is a table summarizing all the carriers with approved rate changes affecting policyholders this year, and the percentage change relative to their 2014 written premiums. Ranked in order from high to low using total 2015 premium revenue increases.

Carriers

Policies Affected2015 Revenue Increase ($)2014 Total Written Premium

GEICO

87,905$7,350,316$88,900,000

Allstate

30,3382,760,14083,100,000

Esurance

14,2732,675,24810,800,000

American Commerce

21,6541,694,47128,000,000

Travelers

11,005697,89623,600,000

Progressive

69,386360,830134,630,000

Nationwide

20,771281,97446,700,000

Harleysville

1,724138,6123,000,000

Amica

43,25784,47987,600,000

Encompass

1,42802,200,000

GEICO: The total revenue increase GEICO gained from rate changes filed this year came close to $7.4MM, collected from nearly 88,000 of its policies. Out of the $16MM increase approved in Rhode Island across the largest companies, GEICO’s share accounts for 46%. The company is the third largest underwriter in Rhode Island, and the $7.4MM premium increase is equal to 8% of its 2014 total written premiums in RI.

Esurance: The total revenue increase for Esurance from rate changes was the second highest to GEICO’s. Affecting more than 14,000 of its policyholders, its approved rate filings generated $2.7 million more in premium revenue, which marked a 25% increase from the company's total 2014 written premiums in Rhode Island. By far, that is the greatest percentage increase in underwriting business - the company's total written premiums - that any one insurer has experienced as a result of approved rate changes in 2015.

Largest Maximum Rate Increases: Most of the field changes affected the carriers' premium calculation algorithms, such as change in base rates and rating factors. This means that there will be a range of actual rate impact across the group of policies impacted. As part of the filings, carriers must also indicate the maximum and minimum rate change an individual policy could be impacted by for approval. This year, the largest maximum rate increase approved was 44.2%, from Nationwide, who requested an overall 7.4% rate change that applied to nearly 1,600 policies. On the other end of the same group, the minimum rate change would be a decrease in rates of 6.7%. The second largest was from American Commerce, who was approved for a maximum rate increase of 31.8% applicable to 5,600 of its policies (with the minimum decrease being 22.1%).

2016 Rate Increase Outlook

Companies have already begun requesting rate increases for 2016 business. As of early December, the latest filings extend as far as March 2016. We already see a trend of more premium increases in the near future, and expect that policyholders renewing their existing policies or searching for new quotes may see higher auto insurance rates in Rhode Island in 2016. These changes are projected to affect close to 152,000 policyowners, which is more than 50% of the total number of impacted policies in 2015. As insurers continue to file for more rate changes in response to insurance losses, Rhode Island motorists may need to brace themselves for a larger insurance premium increase compared to recent levels. The rate changes are certain to affect how Rhode Island compares to other states for car insurance rates.

For 1Q 2016, if all pending rate changes are approved, Rhode Island drivers affected will see another $12.7 million increase in insurance premiums from Allstate, USAA, Nationwide, Esurance and Progressive. Among them, only USAA's rate change has been approved and will take effect on renewal policies starting in February. The rest of the insurers are still pending approval from the Rhode Island Insurance Department.

Auto Insurance Company

Policies AffectedPremium Revenue Increase2014 Total Written Premium

Approved

USAA

25,866$2,641,903$39,100,000

Pending

Allstate

32,016$6,182,187$83,100,000

Nationwide

16,6241,910,46946,700,000

Progressive

69,8241,804,526134,630,000

Esurance

7,477165,49010,800,000

Methodology

Data on rate changes, premiums and number of policies affected were collected from Rhode Island’s insurance SERFF filings, which is open to public access. We only looked at filings that pertain to rate-related changes for Private Passenger Auto insurance programs that the largest auto insurance companies filed within the last twelve months in Rhode Island.

Note that these filed rate changes by no means reflect all the rate increases Rhode Island policyholders may have experienced. There are generally two main types of rate changes: those that change auto insurers’ rating methods and factors across large groups of risks, and those that are based on individual drivers' changing risks. A few examples include: moving to a region that is historically more prone to accidents (increase in risk), buying a new car with safety features (decrease in risk), or having new traffic tickets or at-fault accidents added to their driving records (increase in risk).

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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