Allstate still loses money on auto insurance, despite rate hikes

Allstate still loses money on auto insurance, despite rate hikes

by Dave Lachance

Despite raising average rates of 8.3% in all 50 states, Allstate continues to lose money on auto insurance, according to the company’s second-quarter underwriting results.

The carrier said it paid about $1.08 for every dollar of premium in its auto business to cover claims and expenses. Even after discounting the impact of claims payments due to wind and hail storms, mainly in the Midwest, Allstate paid $1.02 for every dollar in premiums.

Allstate has been delivering on its promise to aggressively raise rates to investors to make its auto insurance business profitable. The company reported implemented rate increases totaling $258 million in the month and $601 million in the quarter, after implementing rate increases of $862 million and $702 million in the first quarter of 2022 and the fourth quarter of 2021, respectively.

In a Securities and Exchange Commission filing, Allstate said it was not seeking higher rates. “All states continue to implement significant insurance rate increases, keeping in mind the ongoing inflationary impact on claim severity,” it said.

The carrier reported three factors reflecting a “steady increase” in loss costs:

  • The increase in physical damage costs is geographically widespread and reflects higher part prices, labor rates, and length of claim settlement.
  • The increase in injury claim costs reflects more serious vehicle accidents, increased medical inflation, higher consumption of medical treatment, and more claims with attorney representation.
  • Claims reported in 2021 but settled in 2022 were subject to increased vehicle prices, parts and labor rates experienced in 2022, which contributed to the adverse loss of reserve development.

Crain’s Chicago Business reported that, with the increase, career rates are now above pre-pandemic levels.

The results come after consumer groups and some state lawmakers pressured auto insurance carriers to hand back excess profits made during the pandemic when miles driven fell sharply.

Earlier this month, the Illinois Department of Insurance released data showing that despite providing discounts, auto insurers made hundreds of millions of dollars more in profits from their customers in that state during the pandemic.

According to an analysis by the Illinois PIRG Education Fund and the Consumer Federation, Allstate and Illinois’ remaining four largest carriers by market share — State Farm, GEICO, and Progressive — charged customers $280 million more than they needed to maintain their 2019 profits. America (CFA).

This is after taking into account the $220 million that the four insurers collected and provided in customer returns in 2020, the two organizations said.

The analysis was based on data provided directly by insurers in response to a data call from IDOI, a one-time demand prompted by a request by 16 Democratic state senators in January. While the IDOI does not have the authority to regulate rates, proponents hope the data release will increase pressure on carriers to provide more premium relief.

More information

Statistics from auto insurers show they pocketed millions in Illinois epidemic profits

Allstate, GEICO top list of auto insurance premium carriers


Allstate Canada headquarters in Markham, Ontario, Canada. Allstate Corporation is an American insurance company. (JHVEPPhoto/iStock)

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