Auto insurance rates climbing for Mass. drivers

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Traffic at Sullivan Square in Charlestown.David L. Ryan/Globe Staff

Hundreds of thousands of Massachusetts drivers will see their auto insurance bills increase between 6 and 9 percent, on average, in the coming months, as premiums rise at the fastest pace in more than five years.

Insurance companies and industry officials blame the surge on lower gas prices and an improving economy, which has put more drivers on the road — and in turn has increased the number of accidents, including fender-benders and collisions during the record snowfall in 2015.

And as cars have become more sophisticated, equipped with cameras and sensors, the cost of repairing them has climbed, along with health care expenses for injured drivers and passengers, insurance executives say.

Some of the steepest increases are at companies that have relatively small shares of the Massachusetts market, but they still cover tens of thousands of motorists. Texas-based United Services Automobile Association, or USAA, has been raising rates on its more than 80,000 Massachusetts drivers by an average of 8 percent since May, the insurer's first increase in eight years.

Boston-based Safety Insurance is scheduled to start charging its 420,000 Massachusetts drivers nearly 6 percent more later this month, the largest single increase the company has implemented since 2008, according to the Massachusetts Association of Insurance Agents.

That contrasts with a 3 percent increase from Mapfre USA Corp., the largest auto insurer in the state, with more than a million drivers. It's the company's biggest hike since 2011.

"Auto was a relatively stable market for a while, but we're seeing hiccups in that," said Tom Skelly, vice president of Deland, Gibson Insurance Associates Inc., an insurance agency in Wellesley Hills.

Since 2008, Massachusetts has allowed insurers to set their own auto insurance rates as a way to encourage more companies to enter the market. The state Division of Insurance reviews the rates and can reject any that are excessive, inadequate, unfairly discriminatory, or violate public policy, but it has rarely done so.

Instead, state officials have negotiated with insurance companies to pare back increases, which they did earlier this year with Boston-based Liberty Mutual, said Christopher Goetcheus, the agency's spokesman.

Liberty Mutual had planned to raise rates by 8 percent before settling on the 5 percent it implemented at the beginning of April, Goetcheus said.

"We have no real concerns about the Massachusetts auto insurance marketplace. We feel it's healthy and the companies are competitive," he said.

The average annual premium in Massachusetts was $1,080 in 2013, according to the most recent data from the National Association of Insurance Commissioners.

The uptick in driving was seen in US Department of Transportation figures released last week, which showed the estimated miles traveled in 2015 increased by 3.5 percent from the previous year.

And after declining for most of the last decade, traffic fatalities were up 7.7 percent last year.

Meanwhile, the estimated average payout for a bodily injury claim rose by 32 percent between 2005 and 2013, to $15,500, according to the most recent data from the Insurance Research Council, an industry group in Pennsylvania.

Insurance companies are facing another challenge to their bottom line: lower investment income.

Insurers invest the money they collect from premiums and count on the returns to help offset the cost of claims, but low interest rates and bets on the struggling energy sector have eaten into that income, increasing the pressure to raise the rates consumers pay.

"We do feel the need to raise [rates], but we feel they are a fair assessment of the cost of insuring a car in Massachusetts," said Glenn Greenberg, a Liberty Mutual spokesman. "We are where we feel they need to be."

Rich Johnson, a spokesman for USAA, said the 8 percent increase translates to an annual premium increase of $120.

"Since last year, the entire auto insurance industry has seen a significant increase of auto claims frequency and severity," Johnson said in an e-mail. "As these trends continue, our overall auto insurance rates must be adjusted to reflect the future projected costs of our members' claims."

Nationally, consumers spent 6.6 percent more in May on auto insurance, the largest one-year increase since 2003.

"Rates are generally going up on everybody," said Robert Hunter, director of insurance at the Washington, D.C.-based Consumer Federation of America. More accidents and additional drivers have played a part, he said, but he questioned why insurers didn't lower rates significantly when their costs were lower.

"Some of it makes some sense," Hunter said. "Insurance companies are much more willing to raise prices when conditions seem to suit them, and not the other way. They definitely made a killing in the past and didn't reduce the rates as much as they should have."

But not all insurers are raising premiums.

Ohio-based Progressive Corp. and Arbella Insurance Group of Quincy have not raised rates so far this year.

Some companies that didn't offer deep discounts to attract customers in recent years might now have the financial means to avoid sharp rate increases, said Bill Suneson, chief executive of the Boston-based online insurance agency MassDrive.com.

But before consumers switch companies to avoid a rate increase they should make sure they can get comparable coverage and discounts, such as accident forgiveness, particularly if they have young drivers on their policies, agents said.

"Consumers saved a lot of money with some of these companies with their low rates. Now it will be interesting to see if they shop around," Suneson said.