The rising cost of car insurance is hitting Nevadans hard, and neither the insurance industry, consumer advocates, nor state government officials expect relief to come any time soon. 

The insurance industry attributes the increased premiums rising costs for car parts and repairs, theft, labor shortages, and risky driving post-pandemic

Some consumer advocates note that companies profited during the COVID-19 pandemic when fewer people were driving, and failed to use those funds appropriately.

And officials with the Nevada Division of Insurance (DOI)  said that while the state has some oversight over premiums, insurance companies are entitled to make a profit.

In response to growing public concerns, the DOI on Wednesday held a webinar on rising car insurance premiums.

Those premiums are rising not just in Nevada but across the country. In the last year alone the cost of auto insurance increased by 18.9% nationally, according to the U.S. Bureau of Labor Statistics.

In 2022, insurance companies paid more in claims than they made, with a loss of $25.6 billion industry-wide, and private auto insurers experienced the highest direct losses of all industry categories, according to a July report by the American Property Casualty Insurance Association (APCIA), the primary trade association for home, auto, and business insurers in the U.S.

During the DOI’s webinar, Robert Passmore, department vice president of personal lines at APCIA, said factors responsible increased premiums include inflation and the increased costs for repairs and parts, and more drivers in Nevada engaging in riskier behavior behind the wheel.

Additionally, increased costs for medical and hospital services and lawsuits in connection with accidents are impacting the industry, Passmore said.

However, Michael DeLong, a research and advocacy associate at Consumer Federation of America, an association of non-profit consumer organizations that aims to help protect consumers, said the rise in premiums is not solely out of the control of insurers, noting that through much of the COVID-19 pandemic, companies were profiting when claims were down as people were on the road less frequently. 

Auto insurance rates have been rising more than the rate of inflation, “and as the rate of inflation has gone down in recent months, auto insurance premiums keep going up,” DeLong added. “It’s important to note that these rate increases come on the heels of massive insurer windfalls during the COVID-19 pandemic.”

‘A reasonable level of profit’

The state must approve increased premiums based on data provided to the DOI by the companies, Todd Rich, the chief deputy commissioner for administrative, accounting, and product compliance for the DOI, said at the webinar. 

“Before that rate increase is approved, the division ensures that auto premiums that are charged to Nevada consumers are not excessive and are based on the true cost of the coverage they are receiving,” Rich said. 

Any increase is approved after the DOI reviews the filing, and oftentimes the insurance company moderates their proposed rate increase after the DOI review, Gennady Stolyarov, the lead actuary for property and casualty at the DOI, said at the webinar.

But the DOI also pointed out that they have to continue to ensure that the Nevada insurance market is profitable for the insurance companies. 

“It is also important to ensure that Nevada continues to have a healthy and competitive market where many insurers are able to participate, offer their products and earn a reasonable level of profit,” Stolyarov said at the webinar.

The increase in theft of cars is also impacting the cost of premiums, specifically the rise in thefts for KIAs and Hyundais, in Nevada and across the nation. Some insurers are denying coverage to KIAs and Hyundai owners, but the DOI does not oversee the underwriting process and has no way to know if insurers are denying coverage to the owners of these cars, Stolyarov said at the webinar.

Stolyarov notes that KIA and Hyundai have anti-theft software updates to help prevent the rise in thefts after a security flaw exposed on TikTok showed people how to steal the vehicles and became a social media challenge.

‘Inadequate relief’

While these factors play a role in the increased rates of auto premiums, DeLong notes insurance companies are passing the costs of post-pandemic factors onto consumers but benefited from the profits during the pandemic when there was a large decline in miles traveled, crashes, and claims.

“Insurers got some pretty big profits and they unfortunately did not use those profits wisely. When times were tough for consumers, insurers kept most of these additional profits from themselves. They gave executives and shareholders big rewards,” he said.

DeLong noted that when rates should go down, insurance companies “drag their feet and offer inadequate relief” but when economic conditions put upward pressure on premiums, companies “quickly and aggressively raise rates.” 

He also pointed out that insurance companies use a host of socioeconomic factors unrelated to driving to determine car insurance rates, including education level, salary, and where someone lives, burdening those who may be safe drivers but are less educated and less wealthy with higher premiums.

DeLong said it’s unlikely that insurance companies will act in a way that benefits consumers without influence from lawmakers. 

“Lawmakers and regulators have a responsibility to make sure auto insurance is affordable and that consumers don’t experience unfair discrimination,” DeLong said. 

Nevada is often ranked as having some of the highest auto insurance premiums in the nation, a distinction Stolryov with the DOI has attributed to the fact that 75% of the population lives in Las Vegas and “a 24/7 type of economy there.”

Nevada also levies the nation’s second highest tax on insurance premiums. According to the National Association of Insurance Commissioners, the only state with a higher insurance premium tax rate than Nevada’s 3.5% is Hawaii, at a little more than 4%. 

Participants were allowed to ask questions, but because the webinar went over the allotted time only one comment was taken, about the challenge of insuring theft-prone Kias and Hundais. Those who didn’t get a chance to ask questions were encouraged to email the DOI at [email protected].