In Allstate’s case, such legislation has the potential to delay its return to profitability in the auto business—first on the list of Wall Street’s Allstate worries. The company badly lags archrival Progressive, which already is back in the black insuring cars following an unprofitable period. Progressive’s 16% stock price rise this year far outpaces Allstate’s 7% increase.
California, the largest auto insurance market in the US with 12% of premiums, hasn’t approved any auto rate hikes since the start of the pandemic. California Insurance Commissioner Ricardo Lara in October 2021 publicly pointed a finger at Allstate as one of three insurers—including Mercury Insurance and CSAA—in the state that didn’t rebate enough to policyholders during the pandemic period, when driving and insurance claims plunged.
“New data shows these three insurance companies have the largest gap between what they did and what they should have done to provide further premium relief for their policyholders,” he said back then. “On behalf of consumers, I am out of patience.”
Allstate didn’t respond to Lara’s demands. He’s now sitting on a request for a 6.9% rate hike, Allstate CEO Tom Wilson told an investor conference Sept. 13. In response, Allstate is discouraging new business in California.
“That’s 12% of our premiums in the auto business,” Wilson said. “But we’re completely comfortable with (not growing) in California. . . .We can’t give our money away there.”
Northbrook-based Allstate, the fourth-largest US auto insurer, is losing money insuring drivers. With auto traffic back to pre-pandemic levels, and inflation boosting prices for used cars and auto parts, the company is scrambling to stem the losses by raising rates at unprecedented levels.
An Allstate spokesman didn’t respond to a request for comment, but Wilson told investors: “We expect loss costs to continue to increase from here, which requires