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Is it possible to predict exactly where the wind will blow? How about where it will blow 30 years from now?
The First Street Foundation, a nonprofit that works to define and communicate risks posed by climate change, says it has developed a model to assess “hyper-local climate wind risk” in the US now and into the future, in a report released Monday.
First Street estimates that 13.4 million US properties that aren’t currently vulnerable to tropical cyclones likely will be in 30 years’ time. Annual damages from high winds will rise by $1.5 billion to nearly $20 billion in 2053, according to the report, with damages rising the most — 87% — in the Northeast US. The Mid-Atlantic region will see the largest increase in maximum wind speeds, with maximum wind gusts in some places blowing up to 37 miles per hour faster.
The group based its model on pioneering peer-reviewed research by Kerry Emanuel, an atmospheric scientist at the Massachusetts Institute of Technology. Emanuel projected in 2006 that climate change was likely to increase storms’ intensity and might shift their geography.
Working with Emanuel on the new study, researchers simulated 50,000-plus storm tracks based on warming climate conditions. In the future, they determined, more storms in the US would likely reach a strength of Category 3 or higher. Because of changes in weather patterns due to climate change, these storms would also be able to sustain themselves long enough to travel north farther up the East Coast. Buildings in areas that haven’t weathered such severe storms in the past weren’t necessarily built to withstand them.
Study researchers estimated the maximum speed of such storms’ 3-second gusts of high wind, which cause the majority of severe wind damage. They used models provided by Arup, an engineering firm, to evaluate damages such gusts would inflict on dozens of different property types. Combining all these data, they calculated the likelihood that any property in the contiguous US would experience financial impacts from a cyclone, today and 30 years in the future.
Although storms are moving north, Florida now accounts for over 70% of the nation’s total wind risk and will continue to bear most of the losses. After 1992’s Hurricane Andrew, Florida adopted some of the toughest building codes related to wind in the nation. However, these apply only to construction from the mid-1990s on, and frequent hits to the state will work against the stringent codes.
As it has done previously for its risk models for flood, wildfires and heat, First Street will release a wind-risk calculator that can look at individual properties. Insurance firms have sophisticated capabilities for modeling wind damage, but their modeling is proprietary; First Street says its tools fill a market gap by informing owners of their vulnerabilities and how they are growing due to climate change.
“Compared to the historic location and severity of tropical cyclones, this next generation of hurricane strength will bring unavoidable financial impacts and devastation that have not yet been priced into the market,” said Matthew Eby, First Street’s chief executive officer.
However, in order to project risks into the future, First Street combines three different models: a hazard model, an exposure model and a durability model. Each time one model is combined with another it adds another degree of uncertainty to the outcome, said Mona Hemmati, a postdoctoral researcher at Columbia University’s Climate School who does similar modeling.
First Street doesn’t routinely publish its error rates, which is unusual in climate science. The study’s lead researcher Ed Kearns said the estimated increase of 13.4 million homes might be off by up to 2.5 million, plus or minus.
“This is very innovative research,” Hemmati said, “but the uncertainty really needs to be communicated better to the public.”
Leslie Kaufman writes the Climate Report newsletter about the impact of global warming. To contact the author of this story: Leslie Kaufman in New York at lkaufman27@bloomberg.net
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Universal Insurance Holdings Inc. (UVE), parent company of Universal Property & Casualty Insurance Co., last week reported net income of $25.1 million in its fourth quarter, a sharp increase from the previous quarter.
On a per-share basis, the Fort Lauderdale, Florida-based company — Florida’s largest P&C carrier, next to the state-backed Citizens Property Insurance Corp.– said it had a profit of 82 cents. Earnings, adjusted for non-recurring gains, were 72 cents per share.
The company posted revenue of $330.4 million in the period.
For the year, the company reported a loss of $22.3 million, or 72 cents per share. Revenue was reported as $1.22 billion.
Donaghy
The news was in sharp contrast to Universal’s Q3 2022 report, which showed a $72 million loss. Those losses were blamed mostly on Hurricane Ian, which plowed across Florida in late September.
“It was a tough year, but I’m proud of what our team accomplished despite the circumstances,” CEO Stephen Donaghy said in a statement. “The Florida homeowners insurance market has faced significant challenges, but we remain committed to our home state and continue to write new and renewal business. We’re grateful to state officials for passing meaningful reforms at the recent special legislative session, including elimination of one-way attorney fees and assignment-of-benefits, shortening the claims filing deadline to one year and taking steps to reduce the competitiveness of Citizens, among other measures.”
Universal has taken several steps in the last two years to stay ahead of the deteriorating Florida insurance landscape, including the shedding of thousands of policies. The Q4 report shows the carrier had 848,856 policies in force at the end of 2022, a 10% drop from year-end 2021. Universal had 615,796 policies in Florida, about 80,000 fewer than it had in 2021.
But direct premiums written were up slightly, to $416 million, compared to 2021.
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The trend of paying up to protect your home is expected to continue in 2023. NBC 6’s Alina Machado reports
The trend of paying up to protect your home is expected to continue in 2023.
According to the Insurance Information Institute, premiums in Florida are expected to increase an average of about 40% this year, even though lawmakers in Tallahassee approved sweeping reforms in a special legislative session last month.
“The situation has gotten so bad in Florida and the market has been in turmoil for so many years, it can’t just change overnight with the flick of a switch,” said Mark Friedlander, a spokesperson for the Institute. “It’s going to take time.”
The January 2023 Property Insurance Stability Report released by Florida’s Office of Insurance Regulation shows homeowners in Monroe, Broward and Miami-Dade counties are already paying the highest average premiums in the state, with some homeowners facing significant premium increases. You can read the report here.
A Broward homeowner recently told NBC 6 his premium jumped by over $5,000 at renewal in December 2022. He said his existing policy was $4,951 a year and the renewal he was offered last month was $10,136 — more than double what he was paying.
Friedlander said it is not uncommon to see these types of premium increases.
“When an insurance company files a rate change with the Florida insurance regulator, it’s for an average statewide rate increase,” Friedlander said. “But that’s just a starting point … areas that have higher risk are going to pay well above the average and areas in the state that have lower risk are going to pay well below the average.”
Friedlander said the most immediate impact from the newly passed laws homeowners will see this year is that their insurance company will likely be staying in business in the state.
“That’s probably number one because there are still many Florida insurers that are in a precarious financial position,” he said.
He said 19 companies remain on the state’s watch list, primarily because of past litigation expenses.
“It is very concerning that we could see high volumes of new litigation relating specifically to Hurricanes Ian and Nicole that could drive these companies into further trouble,” he added.
NBC 6 reached out to the state regulator to ask about the increase our Broward viewer experienced at renewal. A spokesperson said they were looking into it and would let us know what they find.
Meanwhile, the viewer did tell NBC 6 he was likely going to end up with Citizens, the state’s insurer of last resort. Friedlander said Citizens is expected to reach the highest number of policyholders it’s ever had, sometime this year.
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Calling embedded insurance the “next secular trend in distribution,” Root Inc. CEO Alex Timm in a letter to shareholders said the company has an advantage to scale access in the channel and become profitable.
Root reported a net loss of $58.3 million for fourth quarter 2022, an improvement over a net loss of about $110 million during the same period in 2021. For all of 2022, Root recorded a net loss of about $298 million compared with a net loss of about $521 million in 2021.
However, Timm said the insurtech is positioned for profitable growth in new writings and continued improvements in loss ratios. The company’s fourth quarter combined ratio clocked in at about 180, which is an improvement over combined ratios of about 185 and 217 for the third and second quarters of 2022, respectively. The Q4 2021 combined ratio was about 212.
Root remains committed to embedded insurance, which made up 41% of new writing in Q4 thanks to the company’s partnership with Carvana.
“We continue to see opportunities to increase new writings from Carvana, as well as scale the platform to new partners,” said Timm in the letter, adding that Root “signed a commercial agreement with a national digital financial services” to expand its embedded platform. A third partner is expected soon, said Timm during an earnings call.
“We believe our early embedded success demonstrates our differentiation and serves as a strong proof point for future partners,” he added.
According to its 10K filing, Root said its long-term growth will depend on its ability to attract new customers through its embedded channel, machine learning loss models, and telematics-based pricing. “Our proprietary dataset will continue to scale as we grow, enabling us to enhance predictive models to further improve pricing and attract new customers,” Root said in the filing.
Root said its models, rate increases, underwriting adjustments, and new fee structures allowed the company to reduce the impact of increased claims costs as it “responded to the worst auto insurance cost inflation in history.” Root implemented 53 rate increases in 2022 at an average of 37% across its total book of business. CFO Rob Bateman said during the earnings call that Root expects its renewal book to shrink as the company takes on new embedded customers.
“As we continue to lower loss ratios and manage expenses in the business through 2023, we believe that we are in a strong position to significantly reduce operating loss in 2023,” Timm said.
Chad is National News Editor at Insurance Journal. He has been covering the insurance industry since 2007, reporting on trends and coverage in most lines of insurance as well as natural catastrophes, modeling, regulation, legislation, and litigation. Chad can be reached at chemenway@wellsmedia.com
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A South Florida art dealer pleaded guilty in federal court Tuesday in connection with a scheme involving the sale of fake Andy Warhol paintings.
Daniel Elie Bouaziz, 69, pleaded to a single count of money laundering in Fort Pierce federal court, while prosecutors agreed to drop 16 other counts related to fraud and embezzlement, according to court records. He faces up to 10 years in prison at a May 30 sentencing hearing.
Prosecutors said Bouaziz, the owner of Danieli Fine Art and Galerie Danieli in Palm Beach County, sold counterfeit artwork to a customer in October 2021 including pieces purportedly by Warhol.
Bouaziz told the customer that the pieces, which he was selling for between $75,000 and $240,000, were authentic originals and that some were signed by the artist, investigators said.
Officials said the customer gave Bouaziz a $200,000 down payment that was deposited into Bouaziz’s account, and then the comingled funds were wired to other accounts.
Warhol was an American visual artist and filmmaker most associated with the pop art movement of the 1960s.
Photo: Warhol in 1976. (AP Photo/Richard Drew, File)
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Despite Troubles, Ygrene Energy Seeks Restart on Novel Home Improvement Plan
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Their billboards once plastered South Florida. Their contractors went door-to-door, offering expensive and much-needed upgrades to roofs, windows and air conditioning units — with no money down, no credit check needed.
Ygrene Energy was the biggest player in a novel and controversial industry that bankrolls home improvements and gets paid back by charges added to a homeowner’s tax bill. It was once lauded by politicians and environmentalists, even President Barack Obama, as a key solution to adapting to climate change and hurricanes.
But late last year, Ygrene, the state’s most high-profile green energy finance company, suddenly vanished from the Florida market — a move that left contractors in the middle of projects unpaid and homeowners scrambling to pay big unexpected bills. Now, despite an ongoing investigation into the company by Florida’s attorney general, over a hundred consumer complaints and dozens of lawsuits across the state, Ygrene may be poised to restart business in Florida, its largest and least-regulated market.
For Ray and Kelly Coulter, the company’s abrupt withdrawal came weeks after their brand-new roof and impact windows were installed on their West Palm Beach home.
The email — sent October 5 — said that Ygrene, the company responsible for paying the contractors, had canceled its financing. That left the Coulters with a $45,000 bill that was supposed to have been paid out through manageable and appealing annual payments attached to their tax bill.
“We were sold a bill of goods that’s no longer there,” said Ray, a 53-year-old facilities manager.
Coulter is one of more than a dozen homeowners and contractors across Florida the Miami Herald spoke to about the problems caused by Ygrene’s sudden withdrawal. Public forums, like the Better Business Bureau and Google reviews, are filled with recent posts from frustrated homeowners and contractors.
Jonathan Akl, a St. Lucie-based contractor, said he had 60 projects affected under his former employer, a Broward County-based roof and solar company. Construction ground to a halt, leaving some homeowners with unfinished roofs while the financial details were worked out.
“We had 60 open files with the company. They reneged on every single one of them,” he said. “Literally at midnight they dropped all contracts that weren’t closed. A lot of people got screwed.”
Exactly how many people is hard to pin down. Ygrene wouldn’t share numbers, although the company estimated at one time it signed around 2,000 new contracts a month. Based on conversations with others in his industry, Akl’s personal estimate is that the withdrawal disrupted thousands of contracts statewide.
Back in October, Akl said his former company’s lawyers pondered suing Ygrene but found contract language gave the company the legal right to pull out at any point until the homeowner actually started payments.
That clause can leave a large window of time because Ygrene specializes in a unique type of financial agreement called the property-assessed clean energy program, or PACE.
Companies like Ygrene that provide money for “green” home improvement projects don’t refer to it as a “loan” but — just like banks and mortgage companies — they make money by charging fees and interest rates. But instead of writing a check to the company, homeowners pay only through their annual property tax bill, collected from a lien local governments allow to be placed on the property.
For tens of thousands of customers already paying for completed projects, Ygrene’s sudden exit had no impact. But homeowners and contractors with projects left in limbo told the Herald they had to race to find new funding, or in some cases drop the work altogether. Some homeowners said they paid off contractors with their credit cards, racking up tens of thousands in debt. Contractors expecting to be paid by the company right after the job also faced uncertain delays and potential battles to collect for their work.
Dr. Mohamed Hegazy said he had trouble applying for a traditional home equity loan to cover the costs instead because Ygrene had already placed a lien on his Miramar home when the project got started, even though it had not yet paid the solar and roofing company for its work.
“This company dropped funding without respect to the people or accountability to anyone,” he said. “They should pay for their mistake.”
Plenty of homeowners, including most of Akl’s clients, eventually switched to another PACE company like Renew Financial, which accepted many of the contracts but charged a slightly higher price.
But pulling out of the incomplete Florida projects was only one of the complaints about Ygrene’s practices.
In October, the Federal Trade Commission and the state of California came down hard on the California-based company over how it sold its financial agreements to sometimes-confused consumers. An FTC order said the company deceived consumers about the potential financial impact of its financing and unfairly placed liens on consumers’ homes without consent. As part of its agreement with the FTC, Ygrene agreed to create a $3 million fund to free “defrauded” customers from liens, as well as to step up its monitoring of contractors and to be honest with consumers.
“Today’s settlement holds Ygrene accountable for their misconduct and establishes guardrails to protect property owners from future deception. PACE financing was meant to help families make important home improvements, but the dishonesty of companies like Ygrene has left some homeowners at risk of losing their homes,” California Attorney General Rob Bonta said in a statement.
Florida’s Attorney General’s office also has received more than 100 complaints against Ygrene since January 2019, and a spokesperson confirmed there is an ongoing investigation into the company but didn’t provide further details.
Now, despite the complaints, probes and five-month-long exit from the market, Ygrene has told South Florida officials it’s ready to begin signing up new customers starting on Monday.
Ygrene declined to answer questions about its withdrawal but Mark Scheffel, vice president of government affairs, said in a statement to the Herald that the company believes the majority of property owners left without funding were able to find another way to pay for projects.
“We look forward to the restart of operations in Miami-Dade,” he wrote.
MIAMI-DADE IS THE LARGEST MARKET
There is no doubt that the company has found a large and receptive market in South Florida. At just over 21,000, Miami-Dade has more homes with PACE agreements than any other county in the state. And the vast majority of them _ over 15,000 _ are with Ygrene.
“For some people, PACE is particularly good because it’s not based on your income and it doesn’t necessarily count as debt on your debt sheet,” said Phil Stoddard, the former mayor of South Miami and chair of a South Florida board that oversees Ygrene contracts statewide.
While PACE is often incorrectly advertised as a “government program” by some contractors, it’s actually financed by private for-profit companies. PACE lenders make money off fees and interest collected through annual tax bills for five to 30 years, depending on the project. And because it’s a lien, it makes it a “first priority” payoff in the event of a foreclosure. That’s attractive on Wall Street, where PACE providers also bundle and sell their loans.
PACE is available for commercial projects in over a dozen states without generating much controversy. But only three states have changed their statutes to allow PACE residential projects: California, Missouri and Florida.
And in all three, according to federal and state agencies as well as media reports, Ygrene and other PACE companies have racked up allegations of shoddy workmanship by contractors and accusations that salespeople misled prospective customers or even outright lied to them. Previous reporting from the Miami Herald as far back as 2018 revealed problems with the program that left lower-income consumers in particular saddled with more debt than they could handle.
Many of the industry’s problems come from unscrupulous contractors, who often serve as the unofficial sales and marketing arm of the lending companies. Their at-times misleading pitches are such a persistent source of consumer complaints (and lawsuits) that it worries even contractors who are fans of PACE, like Akl.
“A lot of contractors have ruined the reputation of PACE as is, and now with this happening it’s a nail in the coffin,” he said.
In August, Ygrene announced it was suspending operations in Missouri following an investigation by ProPublica that sparked new state oversight and consumer protections. The news outlet found the high-interest loans disproportionately burdened borrowers in predominantly Black neighborhoods.
At the same time, Ygrene also stopped lending in California, where the program was born and Ygrene was founded. California was the first state to see the PACE program, hailed as an innovative solution to paying for pricey green energy projects, take off. And it was the first state to start seeing problems that came with that rapid growth.
Renovate America, at one point one of the biggest PACE lenders on the market, filed for bankruptcy in late 2020 amid allegations from California regulators that the company created a fake construction company to bilk customers, the San Diego Union Tribune reported.
The state started regulating the industry more strictly in 2016, after some customers who didn’t understand (or weren’t told) what they were agreeing to couldn’t afford their new, higher property taxes and lost their homes, according to reporting from KPIX, San Francisco’s CBS affiliate.
The growing list of complaints prompted a since-settled class action civil lawsuit against Ygrene featuring both Florida and California plaintiffs, which accused the company of not telling consumers that their liens would make it harder to sell their homes. For instance, the nation’s largest mortgage holders, Fannie Mae and Freddie Mac, refuse to buy mortgages of homes with PACE liens, which stay with a property until they’d paid in full.
EVERYTHING STOPPED
Still, Ygrene and the PACE industry continued to do more business around the country, until the company admitted in summer 2022 it was done writing new financing in California and Missouri.
At the time, Ygrene was making some upbeat business comments, with press releases touting an “expansion beyond PACE” into traditional lending and new funding from venture capital firms. But the actual numbers did not look so good. In a public presentation given a week before the company called it quits, Ygrene said rising interest rates and investors’ desire for greater profits left the company “squeezed from both ends.”
“Revenue margins have declined over 60%,” Ygrene wrote.
Fewer Floridians were applying for Ygrene, too. In summer 2020, applications peaked at more than 4,000 a month, according to a chart included in the presentation. In 2021, those numbers were falling every month. By February 2022, fewer than 2,000 Floridians applied.
In response, Ygrene asked the only government board that oversees it, the little-known South Florida Green Corridor, for approval to raise fees and interest rates on consumers, from up to 7.99% to up to 9.99%.
“In order to stay competitive in the capital markets, Ygrene must increase rates accordingly,” it said. The board agreed to allow the company to charge more for its services.
But just days later, everything shut down.
`ALL I GOT WAS A SCRIPT’
Contractors and homeowners got emails that their financing was yanked, their phone calls went straight to voicemail and the website suddenly featured a message — “ATTN: All Ygrene PACE financing operations have been paused.” — directing customers to a traditional home loan service instead.
“I called the number Ygrene gave me and all I got was a script,” said Ray Coulter. “I asked for a copy of that script to be emailed to me, and it wasn’t.”
In a December letter, Ygrene’s CEO, Jim Reinhart, explained the move was due to money problems.
“Ygrene suspended operations in Florida due to the loss of our funding partner making it impossible to fund new projects,” he wrote. “It is Ygrene’s intent and plan to finalize agreements with new capital providers and restart operations in the first quarter of 2023.”
Reinhart wrote that letter to the Green Corridor board, which is staffed with seven South Florida mayors or their representatives.
Because the PACE program collects payments through annual property taxes collected by local governments, it needs an agreement with local governments to operate. For any Ygrene contract in the entire state, that agency is the Green Corridor, which approves rate hikes, new consumer protections and reviews recent complaints and lawsuits against the company.
Stoddard, who as mayor of South Miami has championed environmental causes and pushed to expand solar power, remains an advocate for the program, despite its troubles. He has been the chair of the Corridor’s board for most of the decade it’s been in existence, and he said Ygrene’s withdrawal from the market happened once before and lasted only a couple of months.
“It ran pretty smoothly for the next nine years until this happened,” he said.
COULD IT HAPPEN AGAIN?
Stoddard acknowledges, however, that there’s nothing his board can do to ensure that Ygrene, if it does return to the market, can’t drop out once more if there is business trouble. In fact, the latest contract between the Corridor and Ygrene explicitly allows Ygrene to pause financing for up to six months, or more if the Corridor allows it.
Miami-Dade’s Chief Resilience Officer, Jim Murley, also said he wasn’t sure if there was anything the county could do to protect residents from the same thing happening again. Still, he urged county residents with issues with Ygrene or other PACE companies to contact his office for help.
“We’re here to help any of our residents,” he said.
And if more problems arise, Stoddard said he’s confident the Green Corridor board he leads can work with Ygrene to fix them.
“If we get complaints we can work with Ygrene to change the procedures,” he said. “And we’ve done that.”
Florida law offers very few consumer protections for homeowners financing improvements through any PACE company, although some counties have added additional protections. Miami-Dade, although it has more PACE customers than any other county, falls about in the middle of the pack for protections throughout the state. At the top of the spectrum are Palm Beach and Pasco Counties, which have hired staffers in the tax collector’s office to call up everyone who signs up for a PACE lien and walk them through the process.
Stoddard dismissed some of those efforts as ”over the top and redundant” and worries that more layers of bureaucracy will make the program harder to use and less attractive to customers.
“We provide consumer protections and we’re proud of it,” he said. “Nothing is ever perfect because consumers don’t always read the fine print on everything they sign.”
Photo: Kelly Coulter paints the trim on her newly installed impact windows. (Matias J. Ocner/Miami Herald via AP)
This article was written by Alex Harris, of the Miami Herald.
Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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TAMPA, Fla. (WFLA) — It’s déjà vu for Florida homeowners.
“The sticker shock which we’ve all been experiencing for the past two or three years is not only not over, June 1st could result in the worst sticker shock yet,” said Rollins.
He says your premium could soon go up as much as 25%.
The main driver is the cost of reinsurance, that’s insurance for insurance companies.
Citing industry data, Rollins says in the past four years, reinsurance rates have increased 100%.
Experts expect another jump, 50%, by June 1.
Rollins says when insurance companies have to pay more for their insurance, so do you.
It’s all connected.
“So, when the reinsurers raise their rates 50% in a single cycle like June 1st, that could lead to 25% rate increases for the average Floridian,” said Mr. Rollins.
This bad news came, despite two special legislative sessions intended to address the crisis.
Last year’s reforms made the market less volatile, but lawmakers didn’t cap rates.
This week, the new President of the Florida Senate made a promise about premiums.
“We believe that hopefully within a year or so, your property insurance rates will go down and if they don’t there will be hell to pay,” said State Sen. President Kathleen Passidomo.
Unfortunately, Rollins doesn’t think rates will decrease that fast, but he says they could stabilize if Florida helps insurers get insurance.
Lawmakers already expanded state support for reinsurance last year.
Rollins says it needs to happen again and the support should sunset after three years.
“If the state helps insurance companies with reinsurance, can it be guaranteed that the savings are going to go down to the policy holder?” asked Investigative Reporter Mahsa Saeidi.Zelle fraud cases explode, customers lose millions
“It is guaranteed that any savings from the cost structure associated with state support or a state funded bridge would be passed through to consumers almost immediately in the next round of rate filings, that is true,” said Mr. Rollins.
The Florida Office of Insurance Regulation oversees insurance companies.
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Florida-based Orion180, known for its heavy use of technology as a managing general underwriter, is officially transitioning to a stand-alone surplus lines property insurance carrier.
Orion180 Insurance Co. is domiciled in Indiana and began writing non-admitted homeowners policies in coastal Alabama, Mississippi and South Carolina in December, the company said in a statement. Later this year, the company plans to expand in Indiana, Ohio and Michigan. It is awaiting approval in North Carolina.
Gregg
Orion180 Insurance Solutions said it began in 2016 and has grown steadily since then. As an MGU, it has produced about $150 million in written premium in five years and serves more than 80,000 policyholders in six Southeast states, the company said.
Headquartered in Melbourne, Florida, the MGU works with Goosehead Insurance, Lemon Mohler Insurance and Southgroup Insurance, among others. Kenneth Gregg is CEO and Ryan Jesenik is chief operating officer.
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Allstate Corp. said it estimated catastrophe losses for the month of January of $307 million, or $243 million after-tax from nine events primarily in Texas and California.
Catastrophe losses for the January events were estimated at $309 million, partially offset by favorable reserve reestimates for prior events.
In the same announcement, Allstate updated its initiative to accelerate auto insurance rate increases.
“Allstate continued to implement significant auto insurance rate actions in response to inflationary increases to loss costs,” said Jess Merten, chief financial officer Allstate Corp. “During the month of January, the Allstate brand implemented auto rate increases of 9.9% across 13 locations, resulting in total brand premium impact of 0.7% which are expected to raise annualized written premiums by approximately $182 million.”
Allstate implemented $1.48 billion and $1.14 billion of rate increases in the fourth and third quarters of 2022, respectively.
The update comes about two weeks after Allstate reported a loss of $310 million in the fourth quarter, mostly related to unprofitability in the auto insurance segment where Allstate recorded an underwriting loss of $974 million (a loss of $3 billion for all of 2022).
“The comprehensive plan to return auto insurance margins to target levels continues to be implemented in 2023 and is expected to further increase average premiums, reduce expenses and lower policy growth,” said CEO Tom Wilson.
In a call with analysts to discuss earnings, Allstate’s Mario Rizzo, president of Allstate Property-Liability, detailed the insurer’s plan to restore profit in its auto insurance business. Other than raising rates, Rizzo said advertising expenditures have been cut to manage new business, and underwriting guidelines have been tightened.
But despite catastrophe losses, Wilson recently said he sees homeowners insurance as a “growth business.” Allstate booked fourth quarter catastrophe losses of $779 million – driven by losses from Winter Storm Elliot. The Q4 combined ratio for the segment increased 5.5 points but remained at 92.6. Wilson said Allstate’s homeowners combined ratio between 2017 and 2021 averaged 12 points better than the industry.
The Home Insurance Guru 