State Farm, Louisiana’s largest auto insurer, will cut rates for around a million customers by nearly 3 percent on average this summer, stemming a trend of soaring rates in recent years.
The decrease could signify a stabilization in auto rates here after years of sharp increases. State Farm covers about a third of insured vehicles in Louisiana.
State Farm spokeswoman Felicia Van Frank said the decrease will mean an average savings of $48 per customer in Louisiana for the year, though the rate change will vary by policy. Frank pointed generally to the firm's financial position and "current business and economic conditions in the marketplace" to explain the decision. She declined to speculate on what the decision means for future rate adjustments.
The decrease is the first since 2012, Frank said, when the company dropped rates by 0.6 percent. The last rate hike was a 9.8 percent increase that went into effect in February.
Auto insurance rates have soared nationwide as distracted driving proliferates, cheap gas prices encourage more drivers to get on the road and repairs become more expensive. The effect has been more stark in Louisiana, which has some of the highest auto insurance rates in the country.
“What this (decrease) means, I hope, is that we have seen the worst of the spiking auto insurance rates nationwide that has been going on in the past almost five years now,” Insurance Commissioner Jim Donelon said.
The trend in rate hikes reached “crisis level” in the past two years, Donelon said, when auto rates rose by nearly 9 percent each year on average in Louisiana.
State Farm’s move will cut rates by 2.9 percent and have a $45.7 million impact on 1 million policyholders, according to the rate request filed with the Louisiana Department of Insurance. It will take effect in July for new policyholders and after that date at renewal time for existing customers.
The move comes after State Farm raised rates by an average of 13.5 percent last year, following an 8 percent jump the year before.
Other insurers are hiking rates this year. Louisiana Farm Bureau is requesting a 7.1 percent rate increase on nearly 228,000 policyholders, according to LDI’s latest pending rate filing report. Geico is raising rates by about 11 percent on 165,029 policyholders, and by 4.8 percent on another almost 40,000. Allstate is raising rates by 5.7 percent on 126,754 policyholders.
Donelon said his actuarial staff first noticed a possible stabilization in the market when Louisiana Farm Bureau requested its 7 percent hike — down from a 14 percent increase last year. State Farm’s decrease is an even more stark contrast to the recent trend.
“Things generally track upward,” Donelon said. “It’s the exception rather than the rule when a company comes in and asks for a decrease.”
State Farm has cut auto rates elsewhere in the U.S. this year, including by 3 percent in Texas.