Allstate is raising its auto insurance rates “nearly everywhere” and focusing on increasing returns for the reason that part of its business in reaction to a decline in net gain within the third quarter of 2022, company officials told analysts during an earnings conference call Thursday morning.
The decline in underwriting income resulted from higher loss costs of settling auto insurance claims, company officials said.
Allstate has raised its rates by an average of 6.7 percent in 20 states in the last two quarters, said Glenn Shapiro, president of Allstate Personal Lines.
In a turnaround of 2022, when the COVID-19 pandemic resulted in less road congestion and car accidents, 2022 has witnessed a large percentage rise in the overall degree of accident frequency, CEO Tom Wilson said.
While frequency has not returned to 2022 levels, the increase in severity has more than made up for your, Wilson said.
He told analysts that auto severity in 2022 “has been dramatically impacted by the availability chain disruption and price increases on used cars and original equipment parts.”
The company reported a combined ratio of 97.5 percent because of its auto insurance business within the third quarter, up from 93.1 percent for the same quarter in 2022. The combined ratio provides a comprehensive measure of an insurer’s profitability. A ratio below 100 % suggests that the company is making an underwriting profit, while a ratio above 100 % means that it's spending more income in claims than receiving from premiums.
Toward no more the phone call, Wilson addressed an issue from an analyst who questioned the “around a 7 percent rate increase that you are asking for. I guess that feels high in my experience.”
“Look, we need to make money in auto insurance … and we’re likely to do this,” Wilson responded.
“Simultaneously, we’re not letting on any of the aspects of increasing our share of the market and private property-liability, or expanding circle of protection. All of which we’ve had great progress and success on this year as well as in this quarter, which means you should expect us to carry on to focus on a broad-based approach to increasing shareholder value,” he added.
During the call, officials talked about the benefits of Allstate’s telematics products Milewise, which allows customers to pay based on mileage, and Arity, an analytics company Allstate founded in 2022.
“From the growth standpoint in the off group of the pandemic, we start to see material increase in the customer acceptance to telematics,” Wilson said. “And we’ve really leaned into that with our Milewise product, that is really the only national product available to pay for the mile.”
He spoke in depth about Arity, saying that the 600 billion miles of driving data is has collected has crated “significant value” for Allstate.
“We help people do marketing, more effectively and efficiently. And thus we’re really building quite a platform that will perform a number of things,” he explained.
Among those, he said, are not only seen providing data for Allstate’s own setting of costs, but selling that data and analysis to other insurers too.
“Arity provides that service to another insurance providers, and we’re working to try to expand that effort on their behalf,” Wilson said. “But it moved beyond things i would certainly call telematics as a service, assist me to pull data directly into determine all my customers are doing too. We started collecting more data from ourselves and built a rating service organization to ensure that we can help other insurance companies use telematics to cost the insurance. We feel that they’re getting their [own] capability anyway. So we think that we may as well do it through Arity, and capture additional margin.”
Beyond that, he said, Arity is creating a rating services organization that has been expanded to include lead generation. Between its very own data and that purchased in away from company, “we’re pulling data on the 100 million cars per day at this time,” he explained.
With its Arity IQ product, “we think we can actually work to help people pre-qualify buyers,” Wilson said. On its website, Arity tells prospects, “Knowing which drivers are greater risk by actual driving behaviors such as distracted driving upfront will allow you to price better which means you avoid costly losses.”
“I don’t believe that shows up in shareholder value today since i don’t really see any of the analysts really looking hard and saying ‘what’s it worth,’ but we think it’s substantial value and that we be prepared to continue to grow their business and expand its total addressable market,” Wilson said.