As Allstate raises rates to cope with rising auto insurance costs, it will likewise look to “mitigate repair costs” through its partnerships with repair shops and parts suppliers, a business executive told investors throughout a Q4 earnings call.
The approach may signal the claims settlement process is going to get much more challenging as Allstate seeks to lessen the amount of dollars it spends on repairs.
“Beyond expense reductions and rate increases, we’re leveraging advanced claim capabilities to mitigate loss cost pressure for our customers,” Glenn Shapiro, president, Personal Property-Liability, told investors on Feb. 3.
“We’re broadening strategic partnerships with part suppliers and repair facilities to mitigate repair costs. We’re using advanced claim analytics and predictive modeling tools to optimize repair versus total loss decisions and also to measure the likelihood for injury and attorney representation on casualty claims,” Shapiro said.
“The bottom line is we are highly positive about our capability to restore auto profitability to targeted levels,” he said.
On the income side from the ledger, Allstate has announced to the industry that they’re increasing their rates as their costs rise, and that they see no reason why regulators in the state level would not approve their “justifiable and supportable” new rates.
Allstate raised car insurance rates typically 7% in 25 states within the last quarter of 2022, and can continue seeking higher rates, even in states which have already seen an increase, executives told investors.
Shapiro asserted increases in auto severity “reflect inflationary pressure across coverages, with a number of underlying components of severity rising faster than core inflation.”
Allstate didn't respond to a request from Repairer Driven News to stipulate how “broadening” their relations using the insurer might modify the repair shops and parts suppliers it really works with, who're facing inflationary pressures of their own.
Auto Insurance Loss Costs Influenced by Inflationary Pressures
Auto repair costs have led to a 43% increase in Allstate's expenses in Q4, to in excess of $11.6 billion, the company said inside a statement. Allstate’s P&C combined ratio for its car insurance business rose to 104.3%, and therefore it spent $104.30 for every $100 it collected in premiums. By comparison, the combined ratio because of its homeowners’ policies was 87.1%.
2022 was a year of “two distinct halves as it associated with profitability of car insurance,” Allstate CEO Tom Wilson said. While income for that first six months totaled a lot more than $1.7 billion, thanks to lower accident frequency and offset increased claims severity, that changed within the third and fourth quarters.
“Within the other half of the year, auto claim frequency continued to improve towards pre-pandemic levels and the price of repairing cars and settling bodily injury claims accelerated,” Wilson said.
Shapiro said auto damage to property frequency rose 21.5% in the fourth quarter of 2022 when compared with 2022, but was down 13.3% when compared with 2022.
Although miles driven are approaching pre-pandemic levels, he explained, that’s been moderated with a “meaningful” alternation in time-of-day driving.
Shapiro said higher used car values and rising “OEM materials rates” in 2022 have resulted in higher severities and coverages like collision and property damage.
Asked for any “sort of a situation of the union on the regulatory front,” given inflationary pressures individuals are facing, Wilson said Allstate has been successful at making the case for rate increases and sees pointless why it shouldn't continue being.
“We are continuing to visit at a extremely fast pace across other states as well as certain cases, exactly the same states, again, with rate increases as we get new data and new trends,” he explained. “And to this time, we have – you’re always going to experience some discussions, some push around the data, some negotiation, for a moment, plus some backwards and forwards.”
Rate increases are “less a political issue than a real possibility issue of looking at the numbers and what's the justifiable and supportable rate increase,” Wilson said. “We’ll have pushback in places, and we’ll have discussions and give and take. But overall, we’re obtaining the rates that we need, and we’re going to continue doing that.”
More information
Q4 2022 The Allstate Corporation Earnings Conference Call
https://www.allstateinvestors.com/events/event-details/q4-2022-allstate-corporation-earnings-conference-call-tentative
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