Posted on 03 Feb 2012
Trying to improve profits in its homeowners' insurance business, Allstate Corp. will launch a new product called House & Home that will deal with losses caused by poorly maintained roofing, its chief executive said Thursday.
The Northbrook-based insurer, whose stock whose stock closed up 3.3 percent Thursday on an otherwise flat day for the market, has been hiking homeowners' premiums and that trend will continue, Allstate has said.
During the fourth quarter, homeowners' rate increases averaging 7.8 percent in 17 states were approved as Allstate continued to try to make its homeowners' book of business more profitable, the company disclosed Wednesday.
Speaking to analysts on Thursday morning, Chief Executive Tom Wilson said the company "must continue to raise returns from the homeowners" business. That includes growing insurance premiums, including "making sure we keep average premiums headed up," the company said during the call.
But Allstate is also introducing a new product that it hopes will also improve returns, Wilson said.
"The next inning for us, which will be an important one, is launching a new product called House & Home, which will deal with roof losses," Wilson said. "It deals with roofs differently."
Roofs are an important factor in insurance claims, he told analysts. He cited a homeowner with a poorly maintained roof who is hit with a hailstorm. Allstate might have to replace the roof for $20,000 when the customer is paying only, say, $1,000 for coverage – "obviously not a good trade," Wilson said.
In contrast, "if the roof is a year old, it might have no damage to it, and $900 is the right price" for coverage, he said. "If the roof is 20 years old, maybe we should be charging $2,000 or $3,000."
House & Home "gives us the opportunity to deal with roofs differently," Wilson said. "That's really the next game and we'll need to successfully accomplish that to get to our 13% return on equity by 2014."
Allstate's return on equity at the end of 2011 was about 4 percent.
An Allstate spokesman said House & Home launched in Oklahoma in October.
Separately, Allstate said that Allstate-brand marketing and advertising will remain about the same, but spending on its newly bought Esurance unit will rise. Also, Allstate plans to shift more of its marketing spending from national to local.