State Farm lowering rates
Internal cost cuts behind reduction, insurer says
State Farm, the largest auto insurer in Texas, is decreasing auto insurance rates across the state by 3 percent, a change expected to save the average customer $35 a year.
State Farm, the largest auto insurer in Texas, is decreasing auto insurance rates across the state by 3 percent, a change expected to save the average customer $35 a year.
This and a smaller rate decrease in January were the first by State Farm since 2011. In the years since, the industry has grappled with increases in motor vehicle accidents, expensive auto repairs and volatile weather.
“To see anybody lowering auto insurance rates, it just really stands out,” said Mark Hanna, spokesman for the Insurance Council of Texas.
State Farm, which recently paid out $374.8 million in Hurricane Harvey-related auto claims in Texas, says it does not foresee the risks going away. Rather, this year’s rate decreases are tied to internal cost savings the company is passing along to customers. It has reduced rates in other states, too.
Brent Wroten, vice president of State Farm agencies in Houston, said using more technology and consolidating some claims operations into three facilities
in Dallas, Atlanta and Phoenix allow the company to settle more claims virtually.
During Harvey, for instance, State Farm sent its national catastrophe team to Houston and opened mobile claims offices. However, customers could also call and be connected to employees in one of its hubs.
Using technology, those employees often settled claims without even inspecting the vehicle. If it was parked at a home that State Farm knew took on a certain amount of water, then employees knew the car would be totaled and proceeded to settle the claim.
“We’re continuing to evolve and drive more efficiencies,” Wroten said, “… and try to position ourselves to have a competitive rate in the market.”
The decrease in Texas will take effect in May for existing and new customers. State Farm expects about 3 million people to benefit.
The rate drop reverses a trend. State Farm had raised rates 9.5 percent and 9.2 percent in 2017 and 2016, respectively.
Hanna, of the Insurance Council, said relatively low gasoline prices, a strong economy and growing population put more drivers on the road. That means more accidents and fatalities. Higher emergency room charges have increased the cost of covering people, while additional vehicle technology — sensors and cameras in the bumper, for example — make repairs more expensive.
Compounding that is two years of vicious weather, with 250,000 vehicles totaled by flooding during Hurricane Harvey in 2017 and $2 billion in insured losses caused by hail in 2016, Hanna said.
“There are so many factors that are pushing the rates upward rather than downward,” he said.
In a statement, Allstate said it hasn’t increased auto rates since January 2017 “despite the continued rise in the cost of repairs and medical costs.” It raised rates by an average of 8.7 percent in June 2016.
Jerry Hagins, spokesman with the Texas Department of Insurance, said rate decreases aren’t as common as increases, but they do happen from time to time. Companies are constantly adjusting their rates in reaction to market conditions.
“In general, personal auto rates have been moving upward,” he said.