Among the rate increases approved by DOI last year was an eye-popping nearly 26 percent for GEICO, the second-biggest insurer in Massachusetts with 16 percent of the market.
Last year, the seven largest insurers in the state upped their rates by an average of more than 12 percent — by far the highest one-year hike since at least 2015 — based on a Boston Globe analysis of hundreds of filings with the state Division of Insurance.
The cost of auto insurance in Massachusetts has soared by almost 38 percent since the beginning of 2022, climbing at a pace that is more than double the already elevated rate of consumer inflation for the same period.
The rapid run-up in auto insurance since 2022 is in stark contrast to the previous three-year period, when rates increased by a modest 8 percent, due in part to the pandemic era when there were fewer accidents because many had stayed off the roads.
So far this year, the seven largest insurers, which together control almost 75 percent of the market in Massachusetts, have received state approval for rate increases averaging almost 5 percent.
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A consumer in Massachusetts who paid $1,000 for auto insurance in 2021 is now paying almost $1,380, based on the average rate increase by the seven largest insurers.
Since Massachusetts regulators do not publish notices or summaries of rate changes, calculating the increases requires sifting through hundreds of pages of filings and deciphering the often-times arcane language of insurance.
“Insurance is not optional for drivers, but the cost of insurance needs to be closely scrutinized” by regulators, said Deirdre Cummings, legislative director for the state Public Interest Research Group. “We need to shine the spotlight again on these skyrocketing rates; it’s more important than ever for consumers to shop around to compare prices.”
Drivers have some power to control what they pay, either by searching the market for a better rate or reducing their coverage. Here are some things to know about how to navigate the world of insurance.
Are insurers lining their pockets while we pay more?
You might wonder whether insurers are reaping huge profits while their rates climb higher. In fact, Massachusetts auto insurers did well during the pandemic, earning profits on underwriting of 14.4 percent in 2020 and 9.6 percent in 2021. But now, many are doing worse than when rates were going down.
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After rolling back rates by almost 1 percent in 2021, the industry’s streak of four consecutive profitable years ended in 2022, with a 4.7 percent loss. That prompted insurers to begin significantly jacking up their rates — a trend that continues today.
The profit figures cited here come from the National Association of Insurance Commissioners, which collects and analyzes official data from state regulators across the US.
No state-level profit figures are available yet for 2023, but on the national level, auto insurers in 2023 lost about 5 percent, which was not as bad as the 12 percent loss they suffered a year earlier, according to data compiled by LexisNexis Risk Solutions.
The losses were not felt uniformly in the industry. GEICO, for example, reported $5.3 billion in profits in 2023, after taking a loss in the previous year. That may explain in part why GEICO, after raising its rates by almost 26 percent in 2023, has not requested a rate change in Massachusetts so far in 2024.
So what are the factors behind the increases?
More — and more expensive — claims are driving a rapid increase in the cost of auto insurance nationally and in Massachusetts. Claims are more expensive because the things insurers pay for, such as auto repair and replacement and medical care for those injured in car crashes, have grown more expensive, according to insurance analysts.
Cars and trucks today are increasingly complex, packed with computer chips that do everything from analyzing sensor data to managing emissions. Christopher Stark, executive director of the Massachusetts Insurance Federation, an industry lobby, gave the example of a Honda Civic bumper, which he said is now made up of 26 components, compared to 11 in 1990.
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Are rates going up because we’re bad drivers?
There are some signs that people are being less careful. Distracted driving violations — mostly related to mobile phone use — were up by 24 percent in 2023 among younger drivers, according to LexisNexis Risk Solutions.
In Massachusetts, traffic fatalities increased by almost 25 percent in the 10-year period ending in 2022, but took a 20 percent downward turn in 2023, compared to the previous year, according to the National Highway Traffic Safety Administration.
Any other factors contributing to cost increases?
Climate change is clearly driving up premiums on homeowners insurance, but it’s also a factor in auto insurance, which covers claims for cars and trucks damaged by storms, including flooding and hail. In Massachusetts, coverage for weather damage, known as comprehensive insurance, is optional, which is more expensive.
Auto theft, which also impacts insurance rates, was up by 16 percent in 2022 compared to the previous year in Massachusetts, according to the National Insurance Crime Bureau, a nonprofit organization.
Dave Hedrick grabbed his cat carrier from his car as flood waters rose at the Hathaway Creative Center in Waterville, Maine, last year. Michael G. Seamans
Can the state do anything to slow these increases?
State regulators here have less power than they used to, largely because of changes made to increase competition among insurers in Massachusetts.
Prior to 2008, the state Division of Insurance set auto insurance rates. But under that system some major insurers, including industry giants GEICO and Progressive, declined to write to insurance in the state.
The new system, known as “managed competition,” allows insurers to follow their own complex actuarial computations to set premiums, and now the mission of DOI is to ensure a competitive marketplace and financial solvency of insurers.
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DOI scrutinizes insurers’ projected claims, revenues, and administrative costs to make sure they’re able to pay whatever claims they may face. It can also challenge rates that it deems too high. Those reviews typically includes scores of communications between DOI and an insurer.
Has managed competition worked?
It has certainly increased competition among insurers. Today, there are hundreds of auto insurers licensed in Massachusetts, although the seven largest dominate with about 75 percent of the market: MAPFRE (19 percent of market); GEICO (16 percent); Progressive (9 percent); Safety (8 percent); Plymouth Rock (8 percent); Arbella (8 percent); and Liberty Mutual (7 percent). The increased competition means you can find lower prices, if you’re willing to do the work by switching from GEICO to Safety, for example, and then back to GEICO, and so on.
How can consumers lower their insurance rates?
Shopping around is crucial. Competition can be a good thing for consumers because it drives down costs. But in order to harness the power of competition, you must get multiple quotes, rather than simply renew your policy with the same insurer year after year.
Anything else drivers can do to lower costs?
You can decrease what you pay for insurance by increasing your personal risk of loss. There are changes you can make that means you’ll pay more — and your insurer will pay less — if your car is damaged.
For instance, you can raise your deductible, which is the amount you pay out of pocket before your insurer begins paying (deductibles amounts usually range between $500 and $2,000).
Another way to save is by dropping optional coverages, such as the aforementioned flood coverage. For those who drive an older car, consider dropping optional collision insurance, which covers damage to your vehicle in an accident you caused, such as hitting a tree, guardrail, pole, or other vehicle.
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Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him @spmurphyboston.
Auto insurance rates are soaring in Mass. Here’s what you can do about it.
