Big Drop in Disaster Losses Buoys Allstate’s Second Quarter

Allstate posted a huge turnaround in its second-quarter finances released Tuesday, earning a $423 million profit this quarter compared with losing $624 million in the same quarter last year.

Much of the earnings jump came from a huge drop in catastrophe losses, which amounted to $819 million this quarter. In the second quarter of 2011, the insurer reported more than $2.3 billion in disaster-related losses.

Esurance Drove Much of Premium Growth, Allstate Says

The insurer linked much of its 3.8 percent growth in total written property and liability premiums to its purchase of Esurance last October. Within Esurance, the number of policies in force grew 13.5 percent since the end of 2011, according to Allstate.

Throughout Allstate, however, the amount of auto insurance premiums written shrunk as the average price of policies rose, according to the insurer, which did not specify the average hike.

The insurance carrier said its strategy to “maintain” its auto-related business while “improving” its homeowners business is on track. The insurer sent thousands of nonrenewal notices to customers in South Carolina in July, asking them to bundle their Allstate homeowners coverage with auto coverage or find another insurer.

The insurer has previously distributed such notices en masse, including tens of thousands sent to policyholders in North Carolina last year, and representatives say it is a necessary business practice in which the company cannot prioritize a single kind of coverage or customer.

“Allstate’s priority is to make sure we are able to protect all of our customers in the event they suffer losses,” spokeswoman Nancy Lemke said last month.

Allstate is also competing with direct-to-consumer insurers like Progressive and GEICO, companies that entice consumers to go online for cheap car insurance and skip the use of local agents.

Insurer Plans Usage-Based Expansion

The next phase of competition in the auto coverage market seems to be centered on usage-based insurance (UBI), and the rivalry has gotten heated in recent months.

UBI coverage typically involves installation of a device in a participant’s car that helps the insurer base rates on observed driving habits.

Early last month, Progressive announced that it would offer its UBI program, called Snapshot, to policyholders at other insurers as a 30-day trial.

Also last month, Sprint said it would make its wireless network available to any insurer looking to establish a UBI program. Interested insurers can try out Sprint’s UBI tracking technology as a three-month “jump start trial.” Esurance launched its first UBI program in Texas following the “success” of a UBI-based partnership with Sprint in Arizona.

Allstate followed those major announcements with their own, saying that it was expanding its UBI program, Drive Wise, to seven more states in the U.S. before the end of the year as the insurer conducts in-house test runs with employees and agency owners. The expansion would bring Drive Wise availability to 10 states total.

“As most insurance companies, we’re in the process of continuing to understand the UBI market,” Randy Birchfield, Allstate vice president of product operations, said in an interview last month. “Having internal employees participate in testing certainly helps us get our arms around the information and how we might be able to help.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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