Recent moves by auto insurance carriers to drop coverage for Kia and Hyundai cars as theft risks, or more readily write off damaged Teslas as total losses, are adding to volatility in the auto insurance market, as seen in insurance shopping trends, according to a managing director at J.D. Power.
“With all the rate taking and pressure on the economy and pressure in the industry and loss ratios that’s going on, you’ve seen a lot of shopping rates at all time high,” said Martin Ellingsworth, executive managing director of P&C insurance intelligence at J.D. Power. The automotive data and intelligence company publishes quarterly and annual reports on shopping trends in auto insurance, which track when policyholders look to change carriers based on price.
In early 2023, State Farm and Progressive announced they would no longer cover certain models of Kia and Hyundai cars that lacked electronic immobilizers, a standard anti-theft device in ignitions.
Separately, these two carriers, along with Geico and Farmers, were the subject of disputes by Tesla over their more readily “totaling” low-mileage Tesla cars that had been in accidents, because of high repair costs, according to Reuters.
Progressive, Geico and Farmers did not respond to requests for comment. State Farm replied, stating that it “has stopped accepting new customer applications in some states for certain model years and trim levels of Hyundai and Kia vehicles because theft losses for these vehicles have increased dramatically. This is a serious problem impacting our customers and the entire auto insurance industry. We take seriously our responsibility to manage risk and the impact of excess claim costs on all our customers. In this case, it became necessary to take action to protect our policyholders and our business.”
The carrier added that it is monitoring this issue and would “adjust our approach as appropriate.”
J.D. Power research on carrier switching trends for the second quarter of 2023 found that most policyholders leaving Farmers, Geico and State Farm went to Progressive, and that most policyholders leaving Progressive went to State Farm. These figures do include policyholders who had coverage canceled by these carriers, Ellingsworth added.
When there are quick and abrupt changes in the auto insurance market, as with the Kia and Hyundai theft problem, which got sudden attention from Tik Tok social media videos, insurers are more likely to take underwriting actions rather than just change coverage rates, Ellingsworth explained.
“In the process of rating in insurance, called ‘symbols,’ you can effectively look at the last costs by different kinds of coverage for each car. Usually changes in that schedule would manage the differences in the market,” he said. “But in specific situations in this last year where they’re focusing on some popular trend like a Tik Tok trend saying, ‘Go boost [steal] this car,’ it’s faster than you can react on rates.”
Although the Kia and Hyundai risks were magnified by social media, spikes in thefts of certain makes and models are nothing new, Ellingsworth said, pointing to Honda Accords once being at the top of the National Insurance Crime Bureau’s list.
“When the fad dies out, probably the underwriting action will die out. That’s my guess,” he said.
In addition, electric immobilizers had been added to the affected Kia and Hyundai cars after 2021, and the automakers rolled out anti-theft software starting in February 2023 after the theft trend emerged, free to owners of affected models. In May, the automakers reached a $200 million settlement with owners of affected vehicles, although the insurers have not changed their decision to drop coverage.
Separately, on the issue of writing off damaged Teslas as total losses, the cost to repair is not the only factor in underwriting and pricing coverage, Ellingsworth explained.
Other makes of vehicles comparable in price to Teslas may cost less to repair if they have less sophisticated and costly computer systems or parts. However, if the Tesla has better sensors or other features to prevent collisions, that could mitigate its risk, so that an insurer can underwrite and price coverage for an equal amount or even less than a make of car that costs the same or more than a Tesla.
However, overall, the causes of trends in buying insurance and shopping for insurance can extend beyond just pricing and the availability of coverage, according to Ellingsworth.
“Price matters to a lot of households and price is less important to other households,” he said. “Often, the concept of what value does my insurance company relationship deliver to me is spread across the price of insurance, the quality of my experience with the claims situation, and the quality of the experience with customer service, at a carrier or with an agent.”