Despite 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 results.
The carrier said it paid about $1.08 in expenses and expenses in its trucking business for every dollar it earned. Even excluding the impact of claims payments due to hurricanes and snow, especially in the Midwest, Allstate paid $1.02 for every dollar paid.
Allstate has been making good on its promise to investors to aggressively pursue rate hikes to keep its auto insurance business profitable. The company reported an increase in costs of $258 million in the month and $601 million in the quarter, after spending $862 million and $702 million in cost increases in the first quarter of 2022 and the fourth quarter of 2021, respectively.
In a filing with the Securities & Exchange Commission, Allstate said it did not seek higher rates. “Allstate continues to raise insurance premiums due to continued inflation,” it said.
The carrier cited three factors that indicate a “continuous increase” in loss rates:
- The increase in the cost of physical damage is widespread and reflects the prices, the number of employees, and the length of the sentence.
- The increase in personal injury claims reflects higher car accident rates, higher medical costs, higher use of medical care, and higher attorney fees.
- Demand that was reported in 2021 but stabilized in 2022 was dependent on higher vehicle prices, component prices, and labor costs in 2022, which led to a slowdown in development.
Crain’s Chicago Business He added that, with the increase, the prices of the carriers are now higher than before the epidemic.
The results come as consumer groups and state lawmakers are pressuring auto insurance carriers to claw back excess profits made during the pandemic when mileage fell sharply.
Earlier this month, the Illinois Department of Insurance released data showing that, despite paying interest rates, auto insurers received some profit from their customers in the state during the pandemic.
Allstate and the rest of the four largest carriers in Illinois by market share — State Farm, GEICO, and Progressive — paid customers $280 million more than they needed to maintain their profits in 2019, according to an analysis by Illinois PIRG Education Fund and the Consumer Federation of America (CFA).
The decision was made after taking into account the $220 million the four insurers received from customer reimbursements in 2020, the two agencies said.
The analysis was based on numbers provided directly by the insurer in response to a call from IDOI, which was requested only once as a result of a request made by 16 Democratic state senators in January. Although the IDOI does not have the authority to regulate prices, the critics hope that the release of the data will increase the pressure on carriers to provide more services.
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Allstate Canada headquarters in Markham, Ontario, Canada. The Allstate Corporation is an American insurance company. (JHVEPhoto/iStock)