Many Georgia motorists have seen auto insurance rates rise this year, and the increases have accelerated since a new state law went into effect allowing companies to raise premiums without first getting state approval.
Auto insurance rates increased 6.8 percent in Georgia through September, according to a consumer watchdog group. Across the country, premiums increased 7.5 percent.
Since the Georgia law went into effect Oct. 1, many companies have filed to raise rates 5 percent to 10 percent. A few drivers considered more risky could see their bills jump as much as 81 percent.
The new law allows insurers to change rates on many types of coverage before getting state regulators’ approval. Previously, the state Insurance Commissioner’s Office had to approve rate increases first. The law allows the commissioner to review the rate change but makes it harder to reject or change an increase after it has been put in place, state officials said.
In the two months since the law took effect, more companies raised rates than had done so during the previous nine months. The consumer group Georgia Watch reviewed filings in mid-October and found that 18 companies had raised rates through Oct. 14. Since then, an additional 21 have filed for increases.
Allison Wall, executive director of Georgia Watch, said car insurance rates were going up even before the new law took effect.
“With the economic downturn, the credit crunch, the foreclosure crisis and record job losses in Georgia, there couldn’t be a worse time to raise the cost of mandatory insurance coverage,” Wall said.
According to Wall’s group, the lowest average car insurance quotes in Georgia increased for three straight quarters, from $1,572 at the end of 2007 to $1,681 a year at the end of the third quarter in 2008.
In 2007, Georgia premiums had declined 4.8 percent, according to insurance.com.
Insurers said rates were increased to keep up with claims.
Six companies owned by mega-insurer AIG, which has received about $150 billion in federal assistance to stay afloat, were among those that raised rates after the new law kicked in. AIG officials said the rate increases would have occurred even if the company had not been forced to ask for federal help.
Joe Norton, a spokesman for AIG in New York, said insurers affiliated with his company made rate filings before and after the Georgia law took effect.
“Those filings were made only after considering various risk factors, profitability and our ability to compete for business in Georgia’s highly sensitive rate environment,” Norton said. “Our rate filings, which are never initiated lightly and are always a matter of public record, follow our objectives to maintain reasonable profit levels, to operate efficiently and to be financially sound.
“By doing so, AIG will have the funds to repay the loan from the Fed and to earn a return for the stakeholders in AIG, including the American taxpayer.”
Georgia Insurance Commissioner John Oxendine said some companies may have felt pressure to raise rates because their investments in the markets have plummeted in recent months.
Whatever the cause, many Georgians are feeling the pinch.
Eddie Baker, director of building services at a Macon hospital, said he was surprised when his auto insurance came up for renewal earlier this year and his company raised the rate 27 percent. So he shopped around and switched companies.
“I’ve never had any accidents, no speeding tickets, no nothing,” Baker said. “I was upset about it. I didn’t think it was fair.”
Hubert Welborn, a Warner Robins retiree on a fixed income, said his rates almost doubled this year when he turned 75.
“I thought, hell, this is crazy,” he said. “They put me in the same [rating] group as a teenager.”
Welborn couldn’t find a better deal elsewhere, so he increased his deductibles —- the amount he would pay out of pocket in case of an accident —- and stayed with the same company. That cut the cost of his coverage.
Since the new law took effect in October, rate increase notifications have been coming in steadily to Oxendine’s office.
Wall’s consumer group sided with insurers and Republican legislative leaders when they pushed the bill through the General Assembly earlier this year.
Supporters said it would increase competition and more easily allow companies to raise and lower rates based on the market.
During the 1980s, the state allowed insurers to charge new rates before the commissioner approved them, but rising premiums brought a political backlash and it became an issue in 1990 political campaigns. Insurance Commissioner Warren Evans was ousted by voters that year in a one-sided election. In 1991, Gov. Zell Miller and the new commissioner, Tim Ryles, pushed through legislation requiring prior approval for rate increases.
Insurers have been trying to get the law changed back for years. The new law allows increases without state approval on everything above the legal minimum coverage. Officials say most drivers have more than the minimum coverage.
Oxendine, who lost some power when the law passed, said at the time it would lead to rate increases for drivers.
Over the first few months, he has been proved right, at least for some Georgians.
Through Tuesday, more than 30 companies had filed new rates, with 24 asking for average increases.
Companies file for rate changes that include an average —- what all changes average out to —- and a maximum —- the biggest increase a group of drivers would pay. The maximum can be for any group of drivers the company determines is paying too low a rate, not just the worst drivers, according to Oxendine’s office.
The state’s biggest auto insurer, State Farm, with 1.46 million policies, filed for an average decrease of 0.1 percent. The maximum increase —- the highest increase to any group of drivers based on factors such as age, driving record, etc. —- was 1 percent.
Some other companies set maximum rate increases between 20 percent and 80 percent.
The companies increasing average rates since the new law took effect write about 230,000 policies in Georgia, according to the Insurance Commissioner’s Office. That’s about 3.5 percent of all policies in the state.
Affected Georgians will see the higher rates when they renew their coverage.
Robert Klein, director of the Risk Management and Insurance Department at Georgia State University’s J. Mack Robinson College of Business, said the new law is a good idea, despite the recent increases. He said competition among insurance companies will keep rates down over the long haul.
The idea is that more companies would enter the market and be better able to battle for customers if they could change prices easily, depending on market conditions.
“I have been involved in insurance regulation for 30 years,” Klein said. “I really have not seen any benefits to requiring prior [state] approval of rates. Competition in these markets is relatively fierce. That’s going to, by itself, regulate a company’s pricing.”
When companies have to get the approval of a state regulator to make rate changes, he said, they are less likely to lower them for competitive reasons because they are afraid they might not be able to bring the rates back up if necessary in the future.
Asked about the recent rate increases, Klein said, “If most of the companies filed rate increases after the law change, they felt the [insurance] department kept them from raising rates to adequate levels.”
Oxendine said it’s too early to predict what will happen based on increases in the past two months. But he added, “I think you will ultimately see more increased rates.”
He noted that one of the AIG companies was granted a rate increase by his office in August, then filed for another in October when the new law kicked in.
Oxendine doesn’t buy the argument that allowing companies to freely change rates will mean cheaper insurance because there will be more companies competing.
“There is no way to increase competition in Georgia when everybody is already here,” he said. “There is no one else to come into the state.
“I think what you are seeing already is there are not going to be a lot of decreases.”
RATE FILINGS SINCE OCT. 1
Company name ………………………………average….maximum
…………………………………………percent
…………………………………………change ….change
21st Century Insurance Co. ………………….8.9……..20
AIG Centennial Insurance Co. ………………..9.9……..23.1
AIG National Insurance Co. ………………….2.4……..10
AIU Insurance Co……………………………8.1……..27.9
Allmerica Financial Alliance Insurance Co. ……8.5……..32.1
AMCO Insurance Co………………………….-1.3……..10
American Home Assurance Co…………………..8.2……..28.2
American International Insurance Co. …………9……….24.5
American Security Insurance Co. …………….11.1……..29.3
The Automobile Insurance Company of Hartford ….3.53 ……15
Central Mutual Insurance Co…………………-0.24 ……81.2
Cotton States Mutual Insurance Co……………-2.5……..15
Country Casualty Insurance Co. ………………1.3……..15
Depositors Insurance Co. ……………………7.6……..47.8
Geico General Insurance Co. ………………..-0.9 ……..0
Government Employees Insurance Co……………-0.9 ……..0
Grange Mutual Casualty Co. ………………….2.45……..6.9
Grange Property & Casualty Insurance Co. ……..7.4……..41.8
Infinity Auto Insurance Co…………………-11.5 ……..0
Infinity General Insurance Co. ………………5.59……..7.57
Infinity Safeguard Insurance Co. …………….8.2 ……..9.3
Infinity Select Insurance Co…………………5.56……..7.88
Infinity Standard Insurance Co……………….8.56……..9.53
Lincoln General Insurance Co……………….-10.1 ……..N/A
National General Assurance Co……………….-6 ……….9.9
Nationwide Property & Casualty Insurance Co. ….1.1……..10
Peerless Insurance Co. ……………………..7……….14
Shield Insurance Co………………………..-5.1……..15
The Standard Fire Insurance Co……………….3.32 ……15
State Farm Mutual Automobile Insurance……….-0.1 ……..1
Trustgard Insurance Co………………………9.98 ……14
Unitrin Auto and Home Insurance Co……………7.5……..14.6
Victoria Select Insurance Co…………………3.6 ……..5.69
Source: Georgia Insurance Commissioner’s Office
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