Allstate’s 25% rate hike exploits loophole in state law, Georgia insurance commissioner says
Georgia’s insurance commissioner has accused Allstate of exploiting a loophole in state law to impose a 25% increase in auto insurance rates there, the carrier’s second since the start of 2022.
“I am angry and disappointed that Allstate has chosen to exploit a loophole in state law to implement such a substantial increase in costs for hard-working Georgians when families are already struggling with a historic inflation everywhere from the gas pump to the grocery store,” said Insurance and Safety Fire Commissioner John F. King. “This latest increase means Allstate has now bypassed our office to raise overall rates in Georgia by 40% in this calendar year alone.”
In response, King said he has started conversations with lawmakers about changing Georgia law to give his office “additional powers to protect consumers from these types of inexcusable actions.” Steve Manders, the state’s deputy insurance commissioner, told Repairer Driven News that “nothing has been written yet” in this regard.
Georgia law establishes a “dual rate” filing system governing car insurance rates. The Insurance Commissioner only has the power to approve or disapprove minimum policy filings, while all other filings can take effect immediately under what is known as “file and use”. Allstate’s latest increase falls into the latter category, the Office of the Insurance and Fire Safety Commissioner said in a statement.
Manders said Allstate’s filing differs from the norm in both scope and approach. Usually, he said, a carrier will submit two filings, one for a minimum policy and the other under “deposit and use,” with both filings being reviewed at the same time. Allstate only submitted the “dossier and use” file, bypassing the approval process.
This rate increase will go into effect for new Allstate customers on September 12, while current customers will see the increase on their renewals beginning October 16, the office said.
The commissioner’s office encourages policyholders in Georgia to contact Allstate to discuss the reasons for the increase and the options available to them. Allstate can be reached by phone at 1-800-255-7828, online at www.allstate.com or on Twitter at @allstate.
Responding to “continued inflationary impacts on claims severity,” Allstate raised auto insurance rates by an average of 8.3% across the 50 states, according to the company’s second-quarter underwriting results. Yet he continues to lose money on car insurance.
The carrier said last month that it paid nearly $1.08 to cover claims and expenses for its auto business for every premium dollar collected. Even subtracting the effects of claims payments from windstorms and hailstorms, mostly in the Midwest, Allstate paid $1.02 for every dollar in premium.
Allstate delivered on its promise to investors to aggressively pursue rate increases to return its auto insurance business to profitability. The company said it implemented rate increases totaling $258 million in the month and $601 million in the quarter, after implementing rate increases of $862 million and $702 million in the first quarter of 2022 and the fourth quarter of 2021, respectively.
“The impact of higher claims repair costs and the higher development of claims reserves from the prior year led to a recorded combined ratio of 107.9 in the second quarter,” said the CEO of Allstate, Tom Wilson, in an Aug. 3 statement. “The underwriting loss combined with declines in equity valuations and losses on sales of fixed income securities resulted in a net loss of $1.04 billion and an adjusted net loss of $209 million in the quarter. As a result, we are further accelerating insurance price increases, implementing underwriting restrictions in underperforming states and reducing advertising spend, which should improve profitability and slow policy growth.
In a Securities & Exchange Commission filing, Allstate said it was not done chasing higher rates. “Allstate continues to implement significant insurance rate increases given the continued inflationary impacts on claims severity,” he said.
The carrier reported three factors reflecting “continued increases” in loss costs:
- Increases in physical damage costs are geographically widespread and reflect higher parts prices, labor rates and claims settlement time.
- Increases in injury claims costs reflect more serious car accidents, increased medical inflation, higher consumption of medical treatments and more claims with legal representation.
- Claims reported in 2021 but settled in 2022 were subject to rising vehicle values, parts prices and labor rates in 2022, which contributed to the unfavorable loss of reserve development.
Allstate is still losing money on auto insurance, despite rate increases
Georgia Insurance Commissioner, John F. King. (Provided by the King’s Office)