Allstate, Progressive, Geico saw millions in profits during COVID stay at home – Crain's Chicago Business

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Michigan Avenue, nearly devoid of traffic, on a Friday afternoon in April 2020.

Three of the four largest car insurers in Illinois made hundreds of millions more in profits during the 15 months that made up the bulk of the COVID stay-at-home period than they would have if driving behavior had been normal, according to data just released by state regulators.
That was true even after accounting for the temporary rebates many of them provided in the early months of the COVID shock in 2020.
Northbrook-based Allstate, the second-largest auto insurer in Illinois, was one of the early industry movers, quickly rebating 15% to policyholders over three months from April to June 2020. But even after Allstate’s “shelter-in-place payback,” the profit margin for the company’s Allstate Fire & Casualty unit in Illinois was nearly 15% in 2020 and the first quarter of 2021.
In 2019, the same unit—which accounts for most of Allstate’s auto premiums in Illinois—recorded margins barely topping 3%. If those margins had held in 2020 and early 2021, the $123 million in auto profits would have been more like $28 million.
Two more of the top four auto insurers in the Illinois—Ohio-based Progressive and Chevy Chase, Md.-based Geico—saw similar windfalls.
By contrast, Bloomington-based State Farm, the state’s largest car insurer, essentially broke even in 2020, according to the data. State Farm was by far the most aggressive rate cutter as the pandemic upended daily life for motorists. In Illinois, State Farm moved in the summer to reduce rates by 14% on average.
State Farm insures about one in every three vehicles in Illinois while Allstate, Geico and Progressive combine to insure about the same number as State Farm.
The Illinois Department of Insurance’s unusual data initiative was the result of a request by 16 Democratic state senators in January. Unlike many other states, Illinois’ laws give the department little to no authority to regulate what insurers charge. The idea, urged by consumer advocates, was to show how much insurers profited from the pandemic to put pressure on them to provide more premium relief than they have to date.
“I am appalled that these companies overcharged families sheltering at home and call on the insurers to issue additional refunds promptly,” state Sen. Jacqueline Collins, D-Chicago, said today in a statement. “This is particularly important in Black communities like those I represent, where auto insurers indiscriminately charge higher rates.”
Collins represents a large part of the South Side, as well as parts of the south suburbs.
“Moments of crisis are revealing,” Abe Scarr, director of Illinois PIRG Education Fund, said in the same statement. “Auto insurers took the opportunity provided by the pandemic to charge their customers excessive rates and make windfall profits. The General Assembly should give the Department of Insurance authority to review rate hikes and protect Illinois consumers.”
The new disclosures come as insurers of all kinds are aggressively hiking auto rates now that driving levels have rebounded and inflationary pressures have sharply increased the average cost to settle a claim. Allstate hiked rates by 12% on average earlier this year, seeking to generate another $76 million in annual revenue. Progressive increased its prices by 8% and 10% on average (depending on how policyholders buy from the company—directly or via an independent agent). Geico hiked rates by 12% (in two chunks) beginning late last year.
Even State Farm has acted. It’s hiking rates by 8% (in two separate actions) this year, though it says its prices still are below where they were in 2019.
The insurance industry objected in May to making the information public, with industry association officials saying the department lacked legal authority to do it and it would expose competitively sensitive information. But in the end, the associations didn’t take legal action to try to stop it.
“Those calling for additional givebacks only focus on the short-term period when driving declined, it is important for stable and accurate insurance pricing for insurers and regulators to do what they always have done and look at the long-term patterns impacting driving and loss trends,” Kevin Martin, executive director of the Illinois Insurance Association, said today in a release.
The association represents State Farm and Allstate among others.
Representatives of Progressive, Allstate and State Farm didn’t respond immediately to requests for comment. Geico doesn’t have a media relations contact.
Progressive, which has moved quickly up the market-share ladder in Illinois in recent years and now is the state’s third-largest auto insurer, raked in profits approaching Allstate’s while drivers largely kept their cars parked. In 2020 and the first quarter of 2021, Progressive’s two primary insurance units in Illinois generated about $112 million in profit, according to the data, amounting to a margin of nearly 14%.
Progressive’s margin in 2019 was less than 7%. If the same margin applied to the pandemic period, Progressive’s profit would have been more like $50 million, less than half what it ended up taking in. The rate hike it imposed earlier this year seeks to generate more than $60 million in revenue, according to an Insurance Department filing.
Geico Casualty, that company’s primary auto unit in Illinois, posted a profit margin topping 15% in the five pandemic quarters. Its profit was $87 million.
Geico Casualty’s margin in 2019, by contrast, was less than 6%. If that margin had been applied to the premiums Geico collected during the stay-at-home period, its profits would have been $33 million instead of $87 million. The two recent rate hikes seek to produce $50 million more in revenue for Geico Casualty.
State Farm’s main auto unit, which provided data to the department on an annual rather than quarterly basis, actually lost $15 million insuring autos in Illinois in 2020. That’s a rounding error given the $2.3 billion in premiums it collected.
As a mutual insurer, technically owned by its policyholders, State Farm isn’t subject to the same profitability pressures publicly traded companies like Allstate and Progressive are. Geico is a subsidiary of publicly traded Berkshire Hathaway, the conglomerate run by famed investor Warren Buffett.
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