Allstate hikes auto insurance rates as it leans on telematics

Auto insurance rates - car driving up coins

The insurer has announced that drivers “just about everywhere” will be paying more for coverage.

Allstate has announced that it is increasing its auto insurance rates “just about everywhere” while it adjusted its focus on boosting returns in the car policy market following a drop in its net income during Q3 2021.

The insurer shared this information during a recent earnings conference call with analysts.

The fall in Allstate’s underwriting income was associated with higher loss costs from settling car claims, said company officials. Now, Allstate has raised its auto insurance rates by an average of 6.7 percent throughout 20 states across the country during the last two quarters, according to Allstate Personal Lines President Glenn Shapiro.

This takes the company in the exact opposite direction it traveled in 2020 when the pandemic crisis’ lockdowns substantially reduced road use and, as a result, traffic accidents. On the other hand, 2021 has brought a substantial increase in road use as people return to work, leading to a simultaneous rise in accident frequency, said Allstate CEO Tom Wilson.

Auto insurance rates - Car collision

Auto insurance rates have risen as much as they have due to the severity of recent crashes.

Wilson explained that the frequency of collisions has not yet returned to the levels it had reached in 2019. However, the severity of the crashes has made up for the cost from the overall number of accidents.

According to Wilson, the 2021 collision severity “has been dramatically impacted by the supply chain disruption and price increases on used cars and original equipment parts.”

The insurer reported a combined ratio of 97.5 percent for its car coverage business during Q3, which is an increase from 93.1 percent for Q3 2019. The combined ratio offers a comprehensive measure of the profitability of an insurance company. When that figure drops below 100 percent, it means that the insurer is taking in an underwriting profit. However, when it rises above 100 percent, it means that its claims payments are greater than the amount it brings in from premiums.

Wilson defended the size of the hike in auto insurance rates by confirming that the company is working to make money, but at the same time, it does not intend to make moves that would cause it to reduce its momentum in increasing its market share.

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