Feb. 04--After a year of hefty auto insurance rate increases, Allstate executives say they're waiting to see whether an uptick in crashes continues before deciding whether additional rate hikes are likely.
Auto rate increases across the Northbrook-based insurer's brands totaled $1.1 billion in 2015, most of which came from the Allstate brand, according to a presentation given during a call with analysts to discuss fourth-quarter earnings Thursday.
Rate increases for the Allstate brand were 5.3 percent in 2015, with rates at the Esurance and Encompass units up 7.1 and 9.4 percent, respectively.
That's the highest amount of auto rate increases the company has seen in 10 years, Pat Macellaro, Allstate's vice president of investor relations, said during the call. Allstate released its fourth-quarter financial results Wednesday.
The higher rates were one of the steps Allstate took to increase profits after its auto insurance business was hit by more frequent and more severe crashes, executives said on the call.
Rates policyholders see in 2016 will depend on trends in auto accidents along with other steps Allstate is taking to boost its auto insurance profits, executives said. If the frequency and severity of accidents continue to rise, Allstate could bring "targeted rate increases" to individual states, while a slowdown in crashes could see hikes level off, they said.
The economic recovery, "juiced by a rapid drop in gas prices," means more drivers on the road, often in newer vehicles, said Robert Hartwig, president of the Insurance Information Institute.
That leads to more frequent and costlier wrecks, which drive up insurance premiums, he said.
Allstate executives said they think gas is now so cheap lower prices aren't likely to have much extra impact on how many miles drivers put in.
A rapid rise in gas prices could put the brakes on the increase in mileage drivers are putting in, Hartwig said. But as long as the economy continues improving, he said he expects to see some insurers looking for additional rate increases in the next year or two.
Bloomington-based State Farm already raised auto insurance rates 2.6 percent in Illinois this year after a 0.9 percent increase in 2015, said spokeswoman Missy Dundov. Across the country, rates have increased about 2 to 3 percent each year since 2013 due to more frequent claims, more expensive repairs and drivers racking up more miles, she said.
The number of Allstate-brand auto policies on the insurer's books was up 2.1 percent in the fourth quarter, down from a 2.9 percent increase during the same period last year.
Allstate reported that net income declined 41 percent to $489 million, or $1.18 a share, from $824 million, or $1.86, a year earlier.
Allstate reported an operating income of $1.60 per share in the fourth quarter, down 7 percent from the same quarter in 2014 but, Bloomberg reported, above the average estimate of $1.35 among analysts it surveyed.
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