Allstate seeks to ‘mitigate repair costs’ through settlements and expects little pushback on car insurance rate increases


As Allstate raises rates to deal with rising auto insurance costs, it will also seek to “mitigate repair costs” through its partnerships with repair shops and parts suppliers, an executive said. the company to investors on a fourth quarter earnings call.

The approach may signal that the claims process is about to get even tougher as Allstate seeks to reduce the number of dollars it spends on repairs.

“Beyond expense reductions and rate increases, we are also leveraging advanced claims capabilities to alleviate loss cost pressure for our clients,” Glenn Shapiro, president, Personal Property-Liability, told investors. February 3.

“We are expanding our strategic partnerships with parts suppliers and repair facilities to reduce repair costs. We use advanced loss analysis and predictive modeling tools to optimize repair decisions relative to total loss and to assess the likelihood of injury and attorney representation in claims,” Shapiro said.

“Ultimately, we are very confident in our ability to restore automotive profitability to targeted levels,” he said.

On the revenue side of the ledger, Allstate told the industry that it was increasing its rates as its costs rose, and that it saw no reason why state-level regulators wouldn’t approve. their new “justifiable and justifiable” tariffs.

Allstate raised auto insurance rates an average of 7% in 25 states in the last quarter of 2021 and will continue to seek higher rates even in states that have already seen increases, executives told investors. .

Shapiro said the increase in auto severity “reflects inflationary pressure across hedges, with a number of the underlying severity components rising faster than underlying inflation.”

Allstate did not respond to a request from Repairer Driven News to explain how the “broadening” of their relationship with the insurer could affect the repair shops and parts suppliers it works with, which are themselves facing to inflationary pressures.

Auto insurance claims costs hit by inflationary pressures

Auto repair costs contributed to a 43% increase in Allstate’s spending in the fourth quarter to more than $11.6 billion, the company said in a statement. Allstate’s combined P&C ratio for its auto insurance business rose to 104.3%, meaning it spent $104.30 for every $100 collected in premiums. By comparison, the combined ratio of its home policies was 87.1%.

2021 has been a year of “two distinct halves when it comes to auto insurance profitability,” Allstate CEO Tom Wilson said. While revenue for the first six months totaled more than $1.7 billion, thanks to lower accident frequency and higher claims severity, that changed in the third and fourth quarters.

“During the second half of the year, the frequency of auto claims continued to increase to pre-pandemic levels and the cost of repairing cars and settling personal injury claims accelerated. “Wilson said.

Shapiro said the frequency of damage to automotive property increased by 21.5% in the fourth quarter of 2021 compared to 2020, but decreased by 13.3% compared to 2019.

Although miles driven are approaching pre-pandemic levels, he said, it was moderated by a “significant” change in the time of driving.

Shapiro said higher used car values ​​and rising “OEM parts and labor rates” in 2021 have resulted in higher severities and coverages like collisions and property damage.

Asked about a “sort of state of the union on the regulatory front,” given the inflationary pressures consumers face, Wilson said Allstate had been successful in advocating for rate increases and saw no reason why it should not continue.

“We continue to go at a very rapid pace in other states and even in some cases the same states, again, with rate increases as we get new data and new trends,” said he declared. “And so far we have – you are always going to experience discussions, data pushes, negotiations, if you will, and back and forth.”

Rate increases are “less of a political question than a reality question of looking at the numbers and determining what rate increase is justifiable and bearable,” Wilson said. “We will have pushbacks in places, and we will have talks and give-and-takes. But overall, we’re getting the rates we need, and we’re going to continue to do so.

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Featured Image: An Allstate Insurance office in Houston, Texas. (Brett_Hondo/iStock)

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