Allstate Increases Rates by 25%

Some drivers in Georgia will see a 25% insurance rate increase in the future. Allstate (NYSE: ALL). CBS News reported that the insurance giant is planning to increase rates for around half of its auto policyholders in the Peachtree State by 25%.

A few Georgia drivers could face rate increases of up to 58%, CBS also reported. The rate increases went into effect on May 22, 2016; so some drivers could be paying the higher premiums this month.

What is not clear is why auto insurance rates are going up in Georgia. The state’s insurance commissioner; Ralph Hudgens, commissioned an investigation by independent auditors but results are not yet available.

Rate hikes from Allstate could be coming in other states, CBS reported. The company has not yet announced what those rate hikes will be.


Allstate’s Revenues are down

The real cause of the rate hikes might be found in Allstate’s financials. The company’s revenues have been falling for the last three quarters.

Allstate reported record revenues of $35.72 billion in September 2015; that fell to $35.65 billion in December 2015, and $35.57 billion in March 2016. Ycharts data indicates that the company’s revenues have fallen by $150 million over the past nine months.

To make matters worse the company’s income is in a nosedive. Over the past year; Allstate’s revenues have fallen by $1.187 billion. Allstate reported $2.927 billion in revenues in March 2015 and $1.74 billion in March 2016.

It looks as if some of the forces buffeting the US auto insurance industry are catching up with Allstate. This includes the falling number of young drivers and intense competition from direct insurance sellers like GEICO.

Is a GEICO Rate increase next?

GEICO; part of Berkshire Hathaway (NYSE: BRK.B), is also considering rate hikes of its own. News reports indicate that GEICO is considering its own rate increases for later this year. Interestingly enough the Allstate rate increases could help GEICO by driving more consumers to the well-known brand.

The rate increase could also be an effort to force more drivers to install telemetric devices which track the amount of driving and other information on their cars. Allstate is among the companies experimenting with the wireless devices. Many customers have refused to install the devices, so the rate increases could be a means of promoting that.

Although many drivers will be paying higher car insurance prices if Allstate’s financials are typical of the auto insurance industry. One has to wonder if car insurance is going to be the money maker for investors it was in the recent past.