Regulators are starting to push back against premium increases of as much as 40 percent

A 40 percent increase by Allstate in Georgia, a 32 percent rise sought by Nationwide Mutual Insurance in California, an 11 percent bump by State Farm in New York. Insurers are imposing steep increases on auto insurance rates, with state regulators doing little to stop them.

Premiums are increasing faster than other inflation-hit items, such as rent and food. Car-insurance rates increased 17 percent in the 12 months to May, more than four times the 4 percent rise in overall inflation, Labor Department data show. 

“Unrestrained rate hikes are hitting the pocketbooks of Americans, and those least able to pay are seeing the worst burden,” said Carmen Balber, executive director of consumer group Consumer Watchdog. 

In states such as California and Florida, high auto premium increases are occurring at the same time that homeowners’ policies are getting more expensive, too.

Auto insurers say their rate requests are driven by necessity, not greed. The cost of claims has soared since the pandemic, due to more accidents, higher repair costs, bigger medical bills and increased litigation. Car insurers last year lost on average 12 cents for every dollar of premium written, according to S&P Global. State Farm, the country’s biggest car insurer by premium volume, lost 28 cents for every dollar written last year, posting a $13 billion underwriting loss for its auto arm.

“It’s probably the worst period for auto insurers it’s been in 30 years at least,” said Neil Alldredge, chief executive of industry body National Association of Mutual Insurance Companies.

State regulators’ influence over car-insurance rate increases varies a lot. Their powers range from states such as California, where increases can take effect only after they are approved, to Wyoming, where insurers don’t have to notify the state about rate changes.

New York is one of the toughest policers of car-insurance rate requests, industry executives say. The state has in the past 12 months agreed to a 6.8 percent increase for Geico, and 10.6 percent for State Farm, after the companies originally requested increases of 11.1 percent and 12.5 percent, respectively, according to S&P Global.

The New York Department of Financial Services declined to comment. 

In Florida, another state where regulators have to preapprove any increases to car-insurance premiums, rates have increased 15 percent year-over-year to an average $3,183 for full coverage, according to personal finance website Bankrate. That makes the Sunshine State the most expensive in the nation for auto insurance, the Bankrate study earlier this year found. One reason: big auto insurance losses from last year’s Hurricane Ian. 

The Florida Office of Insurance Regulation is required by state law to ensure rate increases are “adequate to maintain insurer solvency and pay claims,” while also preventing excessive pricing, a spokeswoman said. 

A few states are pushing back. North Carolina’s insurance commissioner has set a fall hearing date to challenge a 28.4 percent increase requested by a group representing the state’s auto insurers. In Georgia, a new law will give the state increased rights to review rate requests. That follows an increase by Allstate of more than 40 percent in its rates last year, which Georgia’s insurance commissioner said “exploit[ed] a loophole” in the existing rules. 

An Allstate spokesman referred to a statement from the Insurance Information Institute, saying “there was no loophole in Georgia,” and insurers had followed the rules. “Making the regulatory process of implementing rate increases more burdensome [under the new law] will make it more difficult for insurers to take on risk,” the statement added.

Insurers say states that push back too hard can end up hurting consumers, by causing companies to either pull back or impose much bigger increases than those initially requested.

California’s insurance commissioner didn’t grant any personal car-insurance rate increases between March 2020 and last fall. Under state laws, insurers can’t stop offering new auto policies if they want to stay in California. 

The companies sidestepped that requirement by making it harder for customers to get policies. Some closed offices or removed their details from agents’ software. Allstate reported a 37 percent drop in new applications in California in the three months through March, almost double its 22 percent fall nationwide.

Now that California’s commissioner has started agreeing to car-insurance increases, some insurers are asking for big numbers. Nationwide has requested 32.3 percent, for example. State Farm has a request for 24.6 percent pending, having already had a 6.9 percent increase approved earlier this year, state records show.

A Nationwide spokesman declined to comment. A State Farm spokesman said that after sustaining unprecedented underwriting losses last year, “we continue to adjust…to make sure we are matching price to risk.”

Denneile Ritter, a vice president at the American Property Casualty Insurance Association, laid the blame for the double-digit rate requests in the Golden State at the door of the regulator. The big rate increases can be traced back to the long hiatus when no increases were approved, she said.

Michael Soller, California’s deputy insurance commissioner, said it was the big insurers who in effect put rates on hold, by failing to request increases until the end of 2021 or even later. 

“Our department’s experts have decades of experience in the insurance industry…but they aren’t mind readers,” Soller added. “We will not accept blame for situations…when insurance companies did not step forward.” 

Write to Jean Eaglesham at Jean.Eaglesham@wsj.com