Buffett talks divisive GEICO rate increases

Investor Warren Buffett discussed a growing problem on American roads that’s causing several prominent insurers to raise rates on long-standing customers

Insurance News

By Lyle Adriano

In an interview with CNBC Feb. 29, investor Warren Buffett said that distracted driving is a growing concern which not only led to an increase in roadside fatalities the previous year, but also hurt the profits of GEICO’s insurance unit. He went on to discuss how the increased occurrence and severity of accidents last year has caused a surge in auto insurance rates.

GEICO is owned by Berkshire Hathaway Inc., a company owned and led by Buffett. The company’s underwriting profit dropped from 2014’s $1.16 billion to $460 million in 2015.

According to data from the National Safety Council, the current estimated number of traffic-related deaths in the country rose by 8% from 2014 to 2015—the largest year-to-year percentage increase in fifty years.

“I personally believe that [it was because of] distracted driving, which was listed for about 10% of the deaths in 2014,” the investor said. “The frequency of accidents, the frequency of deaths per hundred million vehicle miles went up quite significantly in 2015, and that’s the first time in a long time.”

Buffett underlined in his interview that the increases in car accident frequency and severity still occurred despite advances in automobile safety. Those increases, in turn, prompted auto rate increases.

Despite his grim observations, Buffett shared that GEICO’s underwriting experience will be better for 2016 than it was in 2015.

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