To address mounting loss costs driven by inflation, Allstate has revealed it will be increasing its auto insurance rates.
The decision to increase rates represents an approximate 5.1% increase in Allstate’s total auto insurance written premiums. The insurer has implemented 41 rate increases since Q4 2021, averaging 7.8% across 34 locations – these increases equate to about $1.2 billion in gross premiums.
"The increase to Allstate brand total auto insurance written premiums of approximately 5.1% implemented over this five-month period will be earned throughout the year," Allstate CFO Mario Rizzo said in a statement.
In an investor presentation, the insurer noted that auto insurance loss costs over the past five years have been comprised of approximately 60% in physical damage claims and 40% in casualty claims. Allstate pointed to rising used car values – which have jumped 68% since late 2018 – as one of the primary reasons for the surge in loss costs, accounting for 60% of the increase in physical damage claim severity. By comparison, higher impact accidents as well as parts, labor, and repair costs each accounted for about 20% of the increase, FOX Business reported.
The rise in casualty claim severity, which is being driven by more severe collision injuries, medical inflation and greater attorney representation was also highlighted by Allstate.
On top of the rate increases, Allstate said that it is aiming to reduce its expenses, noting that it has achieved about half of its savings to date towards its commitment to reduce its adjusted expense ratio by around 6 points between 2018 to 2024.
Allstate also explained that further pricing actions will continue to be implemented in the coming months as required.
News of the price hike comes after a pair of newly public documents were filed with a California administrative law judge accusing Allstate Insurance of overcharging policyholders it believed to be price insensitive. Both the state insurance regulator California Department of Insurance (CDI) and Consumer Watchdog have made the accusation.
