Allstate is still losing money on auto insurance despite rate increases

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Allstate is still losing money on auto insurance despite rate increases

from Dave LaChance

Despite rate hikes averaging 8.3 percent across 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 out nearly $1.08 in claims and expenses in its auto business for every dollar of premium it collected. Even excluding the effects of claims payments due to wind and hail storms, mainly in the Midwest, Allstate paid out $1.02 for every dollar of premium.

Allstate is making good on its promise to investors to aggressively pursue rate hikes to return its auto insurance business to profitability. The company reported implementing 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, respectively in 2021

In a filing with the Securities and Exchange Commission, Allstate said it is not done seeking higher rates. “Allstate continues to implement significant increases in insurance rates given the continued impact of inflation on the burden of claims,” ​​it said.

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

  • Increases in physical damage costs are geographically widespread and reflect higher parts prices, labor rates and the length of time it takes to resolve claims.
  • Increases in the cost of personal injury claims reflect more severe car accidents, increased medical inflation, higher consumption of medical treatment and more claims with attorney representation.
  • Claims recorded in 2021 but settled in 2022 were subject to rising vehicle values, parts prices and labor rates in 2022, which contributed to the unfavorable reserve development loss.

Crain’s Chicago Business reported that with the increases, the carrier’s fares are now above pre-pandemic levels.

The results come as consumer groups and some state lawmakers pressure auto insurers to return more of the windfalls made during the pandemic, when miles driven plummeted.

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

Allstate and the other four largest carriers in Illinois by market share — State Farm, GEICO and Progressive — billed customers $280 million more than needed to maintain profitability in 2019, according to analysis by Illinois PIRG Education Fund and the Consumer Federation of America (CFA).

That was after taking into account the $220 million the four insurers provided cumulatively in refunds to customers in 2020, the two organizations said.

The analysis is based on data provided directly by insurers in response to a call for data from IDOI, a one-time request prompted by a request made by 16 Democratic senators in January. Although the IDOI does not have the power to regulate fares, supporters hoped that releasing the data would increase pressure on carriers to provide more premium relief.

More info

Auto insurers took home millions in Illinois pandemic profits, data shows

Allstate, GEICO top list of carriers raising auto insurance premiums


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

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