Join Date: Mar 2008
Location: Suburbs, IL
Location: Suburbs, IL
Years Riding: 7 years
How you found us: From friends
The Markets Right Themself - Progressive Increasing Rates
Just wanted to share some friendly news. I'm very much into understanding business and our crazy financial markets. For the longest time I could not determine how Progressive and Geico were able to have such low rates. Compared to the insurance market, their rates were crazy low. In this business, you take in premiums, invest them, and pay out claims.
Considering companies normally don't take in enough premium to pay claims (that means they must make investment profits to survive), I couldn't figure out how they were able to do it. Geico is owned by Berkshire...so maybe Warren being the greatest investor of all time was able to somehow get away with it, but Progressive...no way. So I figured, it was only a matter of time before it caught up to them. And in this article, the CEO even states, it caught up to them and they didn't react in time, so they're a little late increasing rates.
Anyway...others may be interested in how this stuff works, so I'm passing it on. (P.S...Warren is not going to be in charge forever, and my predicition is that his successor will not be able to get the same returns as him, and Geico will be in trouble at that time, and see huge rate increases just as Progressive saw here).
Progressive cranks up rates in Illinois
By Steve Daniels August 07, 2012
View All of Today's News Headlines
(Crain's) — Progressive Corp., the third-largest auto insurer in Illinois, has sharply raised its rates in the state, in many cases by double digits.
In an unusual move for a company that has won market share here and elsewhere by emphasizing cheap rates, Mayfield Village, Ohio-based Progressive last month cranked up prices in Illinois by as much as 11 percent.
Rate hikes ranged from 5.5 percent to 9 percent for customers who bought directly from Progressive, online or through a call center. Those who bought from an independent agent will see an 11.3 percent increase.
Illinois isn't alone. Progressive CEO Glenn Renwick has written and spoken to investors recently about the company's need to boost rates nationwide, largely because of higher claims costs.
In an Aug. 2 letter to shareholders, Mr. Renwick wrote, “While fixing cars or people, our costs have turned up rather significantly and quickly.”
He lamented that Progressive had been several months too late in acting on the cost trends, and as a result, felt forced to raise rates more dramatically than it would have liked.
In an Aug. 3 conference call with analysts, Mr. Renwick said he hoped Progressive wouldn't see customer retention slip because of the rate hikes. “We have a very competitive position in the marketplace,” he said. “Even a rate increase may not necessarily take us out of that competitive position in certain circumstances.”
He said that rate increases throughout the country would be in the mid-single digits.
"We routinely review market and business conditions so that we can ensure our policies are accurately priced," a spokesman wrote in an email. "It is our goal to offer competitive rates while at the same time meeting our profit targets. We believe that even with our rate increase, we will be competitively priced and have tools that can help manage their rate. We advise all consumers to shop around so they can find the appropriate coverage and prices that meet their needs."
A Progressive spokesman didn't have an immediate comment on why Illinois' increases generally are higher than that.
Of the top four dogs in the auto insurance business, Progressive is hiking rates the most in Illinois. Chevy Chase, Md.-based Geico increased prices by 2.5 percent in May.
Likewise, Northbrook-based Allstate Corp., the state's-second largest auto insurer, raised its auto rates by 3 percent to 5 percent in May.
The exception is Bloomington-based State Farm Insurance Cos., by far the largest insurer of vehicles in Illinois, which trimmed its rates in December by 2 percent.
State Farm® - Agent
108 E Lake St. Unit 2
Bloomingdale, IL 60108
Office: (630) 980-9809
Fax: (630) 980-9858
Benjamin Franklin - “It is a strange anomaly that men should be careful to insure their houses, their ships, and their merchandise, and yet neglect to insure their lives”.