Filings submitted April 6 to various state regulators by subsidiaries of Allstate Corp. provide additional information as to the nature and scope of the $600 million "shelter-in-place payback" program the company implemented as a result of changes in driving behavior during the COVID-19 pandemic.
The paybacks are designed to reflect the impact of a reduction in miles driven and the frequency of accidents. Allstate companies are filing the payback as an endorsement to existing personal auto policy forms as a way to "get money back to consumers quickly before the full impact of the pandemic is sorted out," according to a statement included in many of the documents obtained to date by S&P Global Market Intelligence.
The payback will be calculated as 15% of a personal auto policyholder's monthly premium in effect as of March 31 and April 30, subject to a minimum payment of $10 per policy and excluding any vehicles with suspended coverage. Allstate is not issuing any prorated calculations as the program will apply regardless of a policy's effective date and any other endorsement activity. Eligibility will be limited to policyholders who have made at least one payment on their policy.
"We expect each monthly payment to average close to $30 per policy," Allstate explained in the various filings, though the specific averages appear to vary by individual books of business and state.
The data contained in the California filing of Encompass Insurance Co. suggests an average payment of nearly $31.71 per policy per month, while the implied average payment is approximately $30.66 per policy per month for Allstate-brand customers in the state, according to an Allstate Insurance Co. filing. For Esurance Property & Casualty Insurance Co., a separate filing in California includes much of the same language as the Encompass and Allstate documents, but omits references to the number of policies impacted and the estimated aggregate amount of the monthly payments.
In Alabama, meanwhile, data in filings suggest lower average payments. For the state's Allstate-brand customers, the implied average payment would be $25.95, while it would be $28.25 for Encompass-brand customers, according to separate filings by Allstate Indemnity Co. and Encompass Indemnity Co.
The implied average payments are considerably higher in neighboring Georgia: $35.25 on Allstate-brand business, according to an Allstate Fire & Casualty Insurance Co. filing, and $33.79 per Encompass-brand policy, according to an Encompass Independent Insurance Co. submission.
On a consolidated, nationwide basis, personal auto policies in force at year-end 2019 across the three brands totaled 22.4 million, of which 20.4 million were Allstate-brand policies.
The Allstate group ranked as the fifth-largest private auto insurer in California in 2019, trailing the group led by State Farm Mutual Automobile Insurance Co., Farmers Insurance Group of Cos., GEICO Corp. parent Berkshire Hathaway Inc. and Auto Club Exchange Group. In the Alabama market, it ranked No. 4 behind State Farm, the group led by Alfa Mutual Insurance Co. and Berkshire. Allstate was also fourth in Georgia behind State Farm, Progressive Corp. and Berkshire.
While the endorsement indicates that the payback amounts apply to policies in force as of the end of March and April, Allstate said in the filings that it will remain in effect for 180 days and payments "may be extended so long as shutdown conditions and reduced driving persist."
Allstate will record the payments as an underwriting expense, and as such they will not affect the Allstate companies' existing rating plans, nor do they involve a projection of future premium.
"Although customers are driving less and in fewer accidents, the full impact of the pandemic remains uncertain and this payment represents our best estimate of what we are seeing," the Allstate companies said in the filings. "We also are monitoring the impact on repair costs, premiums being received, customer retention, coverage levels, and investment returns."
Allstate submitted the endorsement as a form filing. That contrasts to the manner in which at least one other insurer is seeking to return a portion of premiums paid to customers due to changes in business dynamics resulting from the pandemic.
Next Insurance US Co. and fronting partner Markel Corp.'s State National Insurance Co. Inc. have generally submitted their "temporary relief measure" of a 25% reduction in the April payment for certain small business insureds as rate or rate/rule filings.