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Allstate's excuse to wall street
Old 08-04-2015, 09:39 PM   #1
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Allstate's excuse to wall street

Allstate‚€™s profit missed, because a strong economy caused more car accidents - MarketWatch

About the dumbest thing I have heard in a long time.

Why not try " The dog ate my homework " Sometimes it;s better to say nothing.
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Old 08-05-2015, 12:19 AM   #2
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I would have tried "The economy is so good that we have more road construction than usual - thus more accidents." YMMV
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Old 08-05-2015, 07:39 AM   #3
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I don't know folks, I am inclined to agree with them. It's a fact (other sources confirm) that miles driven have gone up this year, and statistically "more miles = more accidents" and "more accidents = more payouts". "More payouts = higher premiums" has a lag factor. The profits will be higher in a couple of quarters following the higher premiums (if the insurance is for 6 months not 12 months).

And if you assume that the accident-prone 25-year (and younger) folks are getting more jobs and driving more, I am sold.

But I wonder what percentage of overall insurance is for transportation, compared to housing or life or anything else that is insurable.
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Made me look
Old 08-05-2015, 08:11 AM   #4
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Made me look

This thread prompted me to go take a look at their financials. There is a sharp decline in profits, I don't think it has much to do with miles driven. About 1/3 is a decline in homeowners profitability, the other 2/3 is in auto. In auto, there is a big increase in the number or policies written quarter to quarter - close to 10% - along with the increase in claims. From the numbers, without any insight, this looks more like a slip in underwriting standards. This is management, not miles driven.

Edit to add - they also supply separate numbers for their esurance division, which do not show the same increase in claims.
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Old 08-05-2015, 08:12 AM   #5
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It could also be that more un-insured motorists are on the road now too. In MN, I am required to carry un-insured motorist insurance, which is about 1/3 of my state mandated policy.

As the economy improves, more driving, more miles, but not necessarily more insured drivers.
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Old 08-05-2015, 08:19 AM   #6
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The obvious question is have other insurers seen similar problems. If they have, allstate's argument may be valid. If not, bogus...
Pretty easy to check I assume (but I'm too lazy)
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Old 08-05-2015, 08:26 AM   #7
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lol, i heard this on the radio. I agree, keep quiet and folks only think you're a fool, open your mouth and remove all doubt.
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Old 08-05-2015, 08:33 AM   #8
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Something else to consider, is that cars are a lot more complex and expensive to fix nowadays than once upon a time. And in many cases, if the estimate to repair is greater than 60% of the book value, they'll total a car out.

These past few years, with the economy doing better, people have been buying more new cars. And not just that, but nicer, more expensive models as well. So, we're running into the problem of greater repair costs, plus more expensive cars, and it could very well be creating a vicious cycle of costs spiraling out of control.

Edmunds.com did an experiment where one of their employees took a sledge hammer to the rear quarter panel of one of the new aluminum-bodied F-150's. Hit it twice. Did about $4800 worth of damage, although part of that cost was because the shock wave from the hit broke the ~$800 taillight, which had a backup camera in it.

I don't think this increased complexity in cars would cause insurance costs to go up in just one year, but it probably contributes to an upward trend over the long run.

I wonder though, with cars being safer today, what kind of impact that might have on insurance costs? Fewer people die in car crashes nowadays than in the past. However, I wonder, if some people who would have died in a 1975 car, are now injured for life in a 2015 car, perhaps overall medical expenses may rise, as well? Of course, following that logic, someone who was injured for life in a 1975 car crash might only walk away with bruises in a 2015 car.
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Old 08-05-2015, 08:34 AM   #9
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Quote:
Originally Posted by MichaelB View Post
This thread prompted me to go take a look at their financials. There is a sharp decline in profits, I don't think it has much to do with miles driven. About 1/3 is a decline in homeowners profitability, the other 2/3 is in auto. In auto, there is a big increase in the number or policies written quarter to quarter - close to 10% - along with the increase in claims. From the numbers, without any insight, this looks more like a slip in underwriting standards. This is management, not miles driven.

Edit to add - they also supply separate numbers for their esurance division, which do not show the same increase in claims.
I have had Allstate Auto for about 15 yrs and homeowners for close to 30. In the early 90's ? IIRC, My agent warned about "next years rates" going up, he said they took a shellacking on the invested claim reserve portfolio.

I can see more claims , with the increase in new policy. The have been doing fairly frequent miles verification with policy holders. Being a big dog in auto insurance for over 50 years, I don't buy the miles / claim story either. If they are writing a lot of new policy's below cost , time to weed out incompetent management.

Allstate also sells variable Annuities, maybe this forum is cutting into their Annuity business.

I wonder how State Farm and Farmers are doing.
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Old 08-05-2015, 11:45 AM   #10
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In MN, I am required to carry un-insured motorist insurance, which is about 1/3 of my state mandated policy.
I'm also from the land of 10,000.00 liberals
Are you saying that 1/3 of of your auto insurance premium goes to the state mandated un-insured motorist program ?

There's a small fee for uninsured/under insured when I pay my auto insurance every 6 months (which I don't think I should have to pay BTW) but 1/3 ?

Please tell me what I'm missing here
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Old 08-05-2015, 11:50 AM   #11
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I'm also from the land of 10,000.00 liberals
Out of a population of 5.5 million? That's 0.2% liberal. Wow, that's awfully conservative.
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Old 08-05-2015, 12:05 PM   #12
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Back in my working days (I worked in the actuarial field for 23 years, specializing in personal auto insurance), we saw plunging claim frequencies in Bodily Injury (BI) and Property Damage (PD) during the early 1990s recession. This put big downward pressure on insurance rates for those 2 coverages. This was due to fewer people driving, especially to and from work which is when a greater proportion of collision occur. But as the economy improved and more people were driving, more collisions occurred and claim frequencies began to stabilize if not increase, putting upward pressure on insurance rates.


I don't see anything different between then and now as far as the relationship to an overall economy and the movement of BI/PD claim frequencies.
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Old 08-05-2015, 12:19 PM   #13
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That's 0.2% liberal.
That would be a dream come true
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Old 08-09-2015, 11:22 PM   #14
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Looks like I have to eat some crow. Was reading that Berkshire Hathaway earnings of the insurance sector of BH, swung to a loss last quarter, largely from the Geico unit.
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Old 08-10-2015, 08:51 AM   #15
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Looks like I have to eat some crow. Was reading that Berkshire Hathaway earnings of the insurance sector of BH, swung to a loss last quarter, largely from the Geico unit.
After reading this, I went and checked my GEICO bill (car insurance) for the next 6 months. It went up by 12.05%. Ouch !!! No accidents, claims or anything like that.
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Old 08-11-2015, 05:18 AM   #16
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After reading this, I went and checked my GEICO bill (car insurance) for the next 6 months. It went up by 12.05%. Ouch !!! No accidents, claims or anything like that.
Isn't that kind of like a guy losing at the casino then holding up the casino on his way out?
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Old 08-11-2015, 06:36 AM   #17
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Are you saying that 1/3 of of your auto insurance premium goes to the state mandated un-insured motorist program ?

There's a small fee for uninsured/under insured when I pay my auto insurance every 6 months (which I don't think I should have to pay BTW) but 1/3 ?

Please tell me what I'm missing here
Yes. 1/3 of my state mandated coverage is for deadbeats.

I pay a premium of $107.60 for Bodily Injury Liability and and Property Damage Liability insurance. That's the state mandated part.

I also pay another $35.50 for under-insured motorists. And I have a higher coverage amount ($250,000/500,000).

Bodily Injury Liability and and Property Damage Liability $107.60
Uninsured Motorists Bodily Injury $18.50
Underinsured Motorists Bodily Injury $17.00

Total Underinsured Motorists Premium 32.99%

Please tell me what I am missing.... I also have other overages (Collision, Comprehensive), but those are optional.
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Old 08-11-2015, 07:16 AM   #18
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Yes. 1/3 of my state mandated coverage is for deadbeats.

I pay a premium of $107.60 for Bodily Injury Liability and and Property Damage Liability insurance. That's the state mandated part.

I also pay another $35.50 for under-insured motorists. And I have a higher coverage amount ($250,000/500,000).

Bodily Injury Liability and and Property Damage Liability $107.60
Uninsured Motorists Bodily Injury $18.50
Underinsured Motorists Bodily Injury $17.00

Total Underinsured Motorists Premium 32.99%

Please tell me what I am missing.... I also have other overages (Collision, Comprehensive), but those are optional.
Minnesota also requires its drivers buy No-Fault (PIP). That should be part of your denominator. Also, I would not describe Underinsured Motorists (UIM) as a coverage for "deadbeats." UIM covers you in case the other driver has BI insurance but not enough to ay you for your damages. UIM is a tricky coverage because how it kicks in varies by state. (I used to work in the auto insurance field until 7 years ago but I am fuzzy about remembering if Minnesota's UIM is of the broader or more restrictive type. From my quick research, it appears to be of the broader type.) Does this mean the other driver is a deadbeat just because he doesn't happen to have enough BI insurance to covers your losses? He could still have a high BI limit.

I would adjust your percentage as follows:

UM premium / (BI/PD premium + PIP premium + UM premium + UIM premium)

You will end up with a much lower ratio than the 33% you quoted.
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Old 08-11-2015, 07:41 AM   #19
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I would adjust your percentage as follows:

UM premium / (BI/PD premium + PIP premium + UM premium + UIM premium)

You will end up with a much lower ratio than the 33% you quoted.
Thank you for looking at this.

The way I look at it is this. What is the minimum I have to pay, vs what I pay for under-insured motorists.

I have to pay (18.50 + 17.00) extra. Adding in the PIP of $39.60 to my mandated coverage, I get a total of $147.60 (107.60 + 39.60) that I am mandated to pay.

$35.60 / $147.60 = 24.1% more. It is only 10.1% of my total cost by your formula. [18.50/(18.50 + 17 + 107.60 + 39.60)]

And that does not count the extra I pay for 250/500 vs the 30/60 the state mandates. Or my umbrella policy.

If I did not have anything to lose, I would go without insurance altogether. There really is no penalty. You get a ticket, and it goes on your record. If you do not have anything, who cares. Even a judgement or garnishment doesn't matter.
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Old 08-11-2015, 11:28 AM   #20
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Yes, if you reduce the premiums to the minimum (basic, as it was known in my field) limits for all state-mandated coverages, that will change the ratio. You would need to know the premiums for the basic limits for BI/PD, PIP, and UM/UIM. The BI increased limits table was pretty steep in Minnesota, as I recall.
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