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Allstate losing money on car insurance even after rate hikes

  • September 9, 2022

In the second quarter, Allstate paid out nearly $1.08 to cover claims and expenses in its auto business for every dollar of premium it collected. Not including the effects of claims payments due to costly wind and hail storms, mainly in the Midwest, the auto business still was in the red to the tune of $1.02 for every dollar collected.

Allstate reports second-quarter earnings in early August. Based on auto premium levels in the recent past, the underwriting loss is likely to be in the neighborhood of $500 million.

The company said late yesterday that it has hiked rates an average of 8.3% in all 50 states plus another unidentified territory since the beginning of the year. That included a 12% increase in Illinois earlier this year. Northbrook-based Allstate is the second-largest auto insurer in its home state.

Allstate and other major auto insurers are scrambling to respond to higher costs to settle claims, thanks mainly to the rise in used-car prices. The cost of total auto losses is pegged to the cost of Replacing a vehicle.

The rate hikes are expected to continue. “Allstate continues to implement significant insurance rate increases given ongoing inflationary impacts on claim severities,” it said in the Securities & Exchange Commission filing.

The price increases are spurring pushback from regulators in some states. In Illinois, the Department of Insurance required auto insurers to disclose how much they made or lost insuring cars from 2019 to 2021.

The data, made public, showed that Allstate and several other major insurers made profits of about 15% while drivers hunkered down in their homes in 2020 and early 2021. Ordinary profits are in the single digits—often the low single digits.

Allstate appears to have spent much of that bounty buying back stock. Last year, it

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Power of Attorney | This is Money

  • August 14, 2022




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Farmers in US face heat, flooding

  • July 5, 2022

Global grain markets are at a pivot point, with prices finally starting to ease after a dizzying surge earlier this year. Where things go from here could end up being determined by farmers like Justin Sherlock and the extreme weather that’s hitting parts of the US crop belt.

For Sherlock, like most of America’s farmers, crazy weather isn’t anything new. His North Dakota farm gets so much excess water every spring that the area his farm is in has been dubbed the Prairie Potholes for the puddles that form in the middle of fields. But this year has been exceptional. The deluge was so intense, floodwaters submerged acre after acre.

Forget puddles. This spring, the rains were so hard it was more like his farm got dotted with miniature lakes.

“It’s been a struggle,” said Sherlock, who got about 75% of his planned corn and soybean crops into the ground before relentless rainfall forced him to call it quits in mid-June. “It’s been such a long, kind of horrible spring, that I’ll do what I can to grow the best crop I can this year, but I basically already decided to put my hopes on 2023.”

In any normal crop year, flooding on a field like Sherlock’s might not matter that much in the bigger picture of the global agriculture market. After all, North Dakota is a smaller player when it comes to corn, and powerhouses such as Iowa and Illinois saw better conditions for spring planting. But as everyone knows, 2022 is anything but a typical year.

Russia’s invasion of Ukraine has stifled exports from a region that’s known as the world’s breadbasket. The disruption has sent crop futures to near-record highs, with stockpiles extremely tight. That’s adding to rampant food inflation and raising fears of global grain

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Montana Ag Network: Importance of crop insurance

  • July 5, 2022

SUNBURST – After extreme weather conditions have troubled Montanans over the past few years, farmers and insurance agencies across the state stress how critical it is for farmers to acquire crop insurance.

According to the MSU Extension Office, nearly 62% of Montana is farmland. As parts of the state continue to experience drought-like conditions, the need for crop insurance has increased as low crop yields and fire danger become more probable.

Gary Hielig Jr., Senior VP at Rain and Hail Insurance, oversees the crop insurance claims of 7 different states. He noted that last year “Montana was ranked with the highest loss ratio of all states. There was $566 million of claims paid out in the state of Montana last year through different approved insurance providers.”

Hielig stated that around 90% of eligible US farmland is insured.

“They paid their premiums in the years where they did have losses and the program worked really well for them in the year they did have claims so it’s doing what it intended to do,” he said.

Crop insurance helps protect farmers if they have a low crop yield or when the price of their crop is low. Farmers pay a premium and protection will be provided on a corresponding level, much like other insurance. This helps ensure survival of the farm business as their profit is protected.

Nate Aschim, a fourth-generation farmer, commented on the value of crop insurance in his own agricultural community of Sunburst, “with the way the weather’s been the last few years I think a lot of guys would’ve been up against it or have had to fold the tents probably without insurance.”

Korey Fauque of KW Insurance backs this claim up. He noted that out of 300 different farmers, all but a handful paid out

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INSURANCE
November 2023
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