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Allstate's recent layoffs are partly due to Covid-related drop in car insurance claims


Earlier this month Allstate announced that is laying off 3,800 employees , with roughly 30% of those layoffs affecting claims workers. The simple fact is that with the Covid-19 pandemic dramatically curtailing the amount of driving in the United States, the number of claims is down as well.

Indeed, car insurance claims across the board are down nearly 22% nationwide in 2020 compared to 2019 levels. If the claims aren’t coming in, the employees aren’t necessary. Not to mention, as we’ve noted recently , the drop in claims due to Covid-19 has induced insurers to issue partial refunds of customer premiums.

Hence, while companies like Allstate have saved money on claims payouts, they have seen their effective premium revenue decline as well. It’s not clear whether the two effects are cancelling out one another precisely, but it certainly stands to reason that paying salaries to thousands of claims workers who have little work doesn’t make financial sense to a publicly traded company with shareholders to answer to.

The decrease in claims is not uniform nationwide. Even greater declines have been seen in areas with the highest rates of Covid-19 infection. Claims activity had begun to recover significantly in the early summer period, but in recent months hard-hit areas such as Los Angeles, San Francisco, Dallas, and Houston have seen further declines, being down as much as 30%. In less impacted areas like New York City, Atlanta, and Chicago, the recent numbers are down only 15-20%.

The job cuts will cost Allstate $290 million. The company announced that $210 million of the $290 million would go to severance and other benefits, while the remaining $80 million would result from office closures. The decision is part of the company’s multiyear “Transformative Growth Plan” to increase personal property-liability market share.

As part of this plan the company’s wholly-owned Esurance direct sales division has been merged with the Allstate brand for certain operationally activities. In order to achieve improvements in customer value, Allstate is striving to improve the competitiveness of its car insurance pricing. Cost reductions such as the recent layoffs are part of an effort to achieve this goal while maintaining margins.

One important message from Allstate’s layoffs is that the car insurance landscape, like many industries, is much more dynamic than ever as a result of Covid-19. It never hurts to be ready to find alternatives for your car insurance needs if something changes that impacts you in terms of either price or service. Shopping around for car insurance quotes on a regular basis can help you find a better deal, even if you don’t have a pressing need to make a change.

You never know when you will find a chance to save hundreds of dollars a year, just by making a few clicks of your mouse. is here to help with your quote-finding process , as well as helping to inform and educate you about insurance, loans, investing, and banking.