NEW YORK (Bloomberg) — Allstate Corp. and Progressive Corp. are leading the push by US auto insurers to raise premiums in at least 20 states as the $160 billion industry moves to end two years of price reductions.

Insurers say they need higher prices to counter climbing repair and medical costs. Allstate, ranked second by premiums, said collision bills rose 2.2 percent in the fourth quarter from a year earlier and payouts for injuries gained 9.3 percent. Safeco Corp., which gets almost half its total premiums from drivers, reported a $19 million loss on auto underwriting.

The rate adjustment may reverse the 20-percent drop in the market values of Allstate and Progressive during the past 12 months, said Bear Stearns Cos. analyst David Small. Earnings should improve this year because insurers have become better at predicting driving records and then setting prices, he said.

"There's a lag before rate increases show up on the income statement," said Small, who works in New York. "But it's real, it's happening, and you'll see it in earnings by the end of the year."

The largest car insurers include No. 1 State Farm Mutual Automobile Insurance Co., which isn't publicly traded, and Berkshire Hathaway Inc.'s fourth-ranked Geico Corp. Bear Stearns's Small rates Northbrook, Illinois-based Allstate "outperform" with a target of $69 a share, and has a "peer perform" rating on Mayfield Village, Ohio-based Progressive.

Allstate closed yesterday in New York Stock Exchange trading at $47.67 and Progressive was at $18.65.

Rising prices for new vehicles and expenses for labour and replacement parts contributed to a 45-percent increase in car repair costs during the past decade, according to information compiled by the Highway Loss Data Institute in Arlington, Virginia.

Collision costs rose 2.4 percent in the third quarter from a year earlier, according to data compiled by the Property Casualty Insurers Association of America in Des Plaines, Illinois. The cost of auto-body work was up 3.3 percent in 2007, the US Department of Labor reported.

Claims for bodily injuries climbed 6.6 percent in the third quarter, said PCI, which doesn't have fourth-quarter data. That was driven by more expensive hospital visits, which rose 6.7 percent in 2007, according to the Department of Labor.

Auto coverage typically has been a boom-or-bust business, said Bill Wilt, an analyst at New York-based Morgan Stanley. When insurers make money, they cut prices to gain market share. Then, as premiums fail to cover claims, insurers will raise prices.