Car insurance company profits are hitting record highs at the same time that drivers are paying higher premiums to insure their vehicles, reports The Wall Street Journal.

In other words, it’s just more “business as usual.”

Here are three simple truths about car insurance companies: 

  • These are for-profit businesses. They exist to make profits, 
  • They make profits by investing your premiums in the stock and bond markets. If these investments then lose money, they raise premiums. They also increase profits by denying and refusing to pay out on valid claims and by delaying payment on claims for as long as possible to earn more returns on their investments.  
  • Blaming lawyers and lawsuits when they make bad investments is a convenient excuse for when they keep raising your premiums. There is no factual basis to support this claim – and there never has been – but the propagandists and insurance company lobbyists have used this convenient excuse for the past 40 years.

How high are car insurance company profits?

According to the WSJ, one of Michigan’s largest auto insurers is enjoying record profits right now. Progressive’s “quarterly profit more than doubled from a year earlier.”

Similarly, Travelers, another Michigan auto insurer, “reported a record profit for its fourth quarter.”

Why are car insurance company profits so high?

If you guessed “steep rate hikes,” as the WSJ stated, then you’re right. The WSJ explains that insurers see their “path to profitability” as being paved by “[b]ig rate increases,” “sharply higher prices,” “reduced coverage” and “fewer, if any, choices for coverage” for drivers and policyholders.

Since 2021, “10 companies—Allstate, American Family Insurance, Farmers Insurance, Geico, Liberty Mutual, Nationwide, Progressive, State Farm, Travelers and USAA—have each won regulatory approval to boost auto-insurance rates by more than 20%,” reported the WSJ.

Why does this sound so familiar?

In recent years, profits for car insurance companies that do business in Michigan have been described by one study as “record-smashing.”

The study found that insurers such as Progressive, State Farm, Allstate and Citizens – which make up nearly 50% of Michigan’s auto insurance market – had “reported windfall profits.”

In fact, Auto-Owners Insurance Company, which is headquartered in Michigan, recently boasted having had “a record ninth consecutive year” of “underwriting profit” with “more than $1.1 billion in new business.”

Do Michigan drivers really pay that much?

Don’t forget that as the insurance companies are lining their pockets with their record profits, drivers especially in Michigan are emptying their pockets just to afford insurance to keep their vehicles on the road. The studies show that Michigan has the highest auto insurance rates in the nation.

MarketWatch Guides lists Michigan as the “most expensive” state “with the highest average full-coverage car insurance rates.”

ValuePenguin reports that “Michigan has by far the most expensive car insurance rates in the country.” The average rate in Michigan is “more than double the national average.”

The Zebra lists Michigan as having the most expensive “average monthly auto insurance premium.”

Who’s getting rich from car insurance company profits?

The heads of the nation’s largest auto insurance are getting rich from exorbitant car insurance company profits. That’s who. Take the CEO of State Farm for example. His compensation in 2022 was north of $24 million. The CEO of Travelers took in nearly $21 million. And the Allstate head collected a cool $18 million.

A study by the Consumer Federation of America revealed the CEO compensation above as well as the compensation for other top insurance execs.

Of its study, the CFA said it shows that “that CEOs overseeing the nation’s ten largest personal lines insurance companies raked in massive salaries, bonuses, and other payments, while spiking insurance rates are causing hardship for policyholders across the country.”



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