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Allstate plans rate hikes in 10 states, restricts business in New Jersey

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Announcements | Insurance | Market Trends
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Allstate plans to continue increasing auto insurance rates in at least 10 states in 2024, including New Jersey and New York, where the company received double-digit rate increases late last year, according to the company’s Q4 earnings call

The insurer netted $1.5 billion in Q4, a 496% increase from the $303 million loss the insurer in Q4 2022. 

Tom Wilson, Allstate CEO, said the profit reflects the company’s actions to improve auto insurance profitability. He said mild weather conditions in 2023 also helped the company’s bottom line. 

“To further increase shareholder value this year, we remain focused on improving auto insurance profitability,” Wilson said. “There is more work to be done, but we are well on our way.”

While Allstate had a profitable Q4, the company ended the year in the red with a $316 million loss. Yet, the company ended with a 77% increase from the $1.4 billion loss in 2022. 

“Since 2022, the Allstate brand implemented [auto] rate increases 33.3%, which included 16.4% in 2023 and 6.9% in the fourth quarter, driven by the recent approvals in California, New York and New Jersey,” Wilson said 

Late last year, Allstate received double-digit rate increases in New York, New Jersey, and California after Wilson threatened to leave the states if the increases weren’t approved. 

During last week’s earnings call, Wilson said the company will pursue rate increases in 10 states to improve margins. Rate increases will be pursued in other states “to keep pace with increases in loss costs.”

He didn’t provide any details on how large the rate increases could be.

Mario Rizzo, Allstate president of property-liability, answered a question on the earnings call about whether the price increases in New York, New Jersey, and California were adequate. 

“In California, you will remember we filed a 35% rate,” Rizzo said. “We got approval for 30 % but we got approval earlier than our expected effective date. So, effectively, we filed our full rate need and got approval for our full rate need.”

As of last week, Allstate feels comfortable writing business in California again, Rizzo said. He said future loss trends could cause the company to reevaluate. 

“In New Jersey, it’s kind of the opposite story we filed for 29 points of rate,” Rizzo said. “We got approval for just under 17% and as a result of that, we are going to continue to take the more restrictive underwriting actions that we have been taking in New Jersey.” 

Rizzo said the company will continue to pursue rate increases in New Jersey, with two additional rate requests recently filed. 

“New York is kind of somewhere in between,” Rizzo said. “We got approval for a 14.6% rate in December. We have implemented that, that helps, but we still need more rate.” 

The insurer plans to file a full rate request in New York soon, Rizzo said. 

“Depending on how that plays out, that will inform the next set of actions we have taken in New York,” Rizzo said. 

Wilson also said new business could be restricted where the insurer is not seeing target returns. 

The insurer will focus any profitable margins from auto insurance on advertising, Wilson said. 

Rizzo said a reduction in marketing investment directly impacted a decline in new auto-issued applications by 20% in 2023. 

He also said improving auto insurance profitability negatively impacted policies in force. 

“Allstate brand auto policies in force decreased due to reduced new business volumes and lower retention,” Rizzo said. 

A recent Wall Street Journal article said auto insurers have seen stocks jump as last year’s earnings roll stronger than in recent years. 

Progressive netted $1.9 billion in Q4 2023, a 141% increase from the $826.4 million the company netted in Q4 2022, according to the company’s December earnings release

The company’s net income for 2023 is $3.9 billion, more than a 400% increase from 2022. The company recorded $721.4 million of net income earned in 2022. The 2023 annual amount is unaudited. 

Last year, the company announced a plan for “aggressive” rate increases, increasing by 4% companywide during the first quarter. It raised rates by 13% in 2022. 

Progressive will have its earnings call on Thursday. 

Insurers claim pandemic losses from part delays, rising labor costs, and used car values are why they’ve hiked rates in recent years. The rate hikes continually receive criticism from consumer advocacy groups who’ve claimed insurers are overstating needs and overburdening the consumer. 

The WSJ article explores insurers’ delay when asking state governing bodies for premium increases. The increases often come years after the losses happen, the article says. 

For example, losses could happen during times of high inflation. Inflation could stabilize by the time insurers receive approval for rate increases and implement the changes on policyholders’ premiums. 

California Department of Insurance Deputy Commissioner Tony Cignarale was recently asked about the rising insurance rates while speaking at an open board meeting of the Society of Collision Repair Specialists (SCRS). The audience member noted repair shops are noticing an increase in consumer responsibility for out-of-pocket expenses due to short payments while the billpayers are simultaneously increasing their premiums.

Cignarale noted that DOIs tend to see more claim disputes as insurers look for ways to reduce costs while waiting for rate increase approvals. He said those disputes tend to slow down after premiums are increased. However, he said insurers could continue doing some cost-cutting practices they learned worked.


Photo courtesy of JHVEPhoto/iStock

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