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Allstate still losing money on auto insurance, despite rate increases

  • September 4, 2022

Allstate still losing money on auto insurance, despite rate increases

By Dave LaChance
on
Insurance

In spite of raising rates by an average 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 out nearly $1.08 to cover claims and expenses in its auto business for every dollar of premium it collected. Even subtracting the effects of claims payments due to wind and hail storms, mainly in the Midwest, Allstate paid out $1.02 for every dollar in premium.

Allstate has been carrying out its pledge to investors to aggressively pursue rate increases to bring its auto insurance business back to profitability. The company reported implementing rate increases totaling $258 million in the month and $601 million in the quarter, after implementing $862 million and $702 million of rate increases in the first quarter of 2022 and fourth quarter of 2021, respectively.

In a Securities & Exchange Commission filing, Allstate said it is not done seeking higher rates. “Allstate continues to implement significant insurance rate increases given ongoing inflationary impacts on claim severities,” it said.

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

  • Increases in physical damage costs are geographically widespread and reflect higher part prices, labor rates, and length of claim resolution.
  • Increases in injury claim costs reflect more severe auto 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 the rising vehicle values, parts prices, and labor rates experienced during 2022, which contributed to the adverse loss of reserve development.

allstate-auto-insurance-rate-hikes” class=”external”Crain’s Chicago Business reported that, with the increases, the carrier’s rates are now

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