Allstate Price Optimization Hearing in California Scheduled for May

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By Timothy Darragh, BESTWIRE

February 8, 2022

Sacramento, CA — A California administrative law judge has set a date of May 10 for an evidentiary hearing and possible motion for sanctions in a long-running case involving Allstate Insurance Co. and Allstate Indemnity Co. and allegations of price optimizing costing drivers an extra $1 billion.

Chief Administrative Law Judge Kristin Rosi set the date for the hearing last month, the latest step in a legal journey going back to 2015, when the company was accused of discriminatory pricing in federal court.

The California Department of Insurance in 2015 declared price optimization setting insurance rates based on an individual’s or a group’s willingness to pay more for insurance compared to other individuals or classes violated state law and ordered 750 property/casualty companies to refile rates without it (BestWire, Feb. 18, 2015).

Soon thereafter, a California motorist, who had been with the company for 25 years, filed a federal suit on behalf of herself and other Allstate customers, alleging the company charged its “most loyal” customers more than others of equal risk.

Allstate denied the allegations in court, and in a statement, repeated its position.

“Allstate has never used price optimization in California,” it said. “We provide affordable coverage to Californians and all our rating plans are stringently reviewed and approved by the California Department of Insurance before they go into effect.”

In March, 2016, the judge in the case stayed the matter and referred it to the California Department of Insurance to investigate if Allstate practices followed the law under Proposition 103.

Allstate argued the proper venue was in an administrative court, with the insurance commissioner.

Testimony recently made public following a records request by The Markup showed Allan Schwartz, president of AIS Risk Consultants of New Jersey, testified Allstate indeed used price optimization in several of its programs. Schwartz was hired by Consumer Watchdog, which joined the department’s case.

“Certain Allstate policyholders were impacted by being charged premiums higher than appropriate, because of Allstate’s use of relativity values for the discounts listed above that were higher than the actuarially indicated value,” he said in prefiled testimony. “The aggregate overcharge to these policyholders from the time of the Allstate filing implementation to date is about $1 billion.”

Allstate in an email responded its policyholders “received all discounts for which they were qualified to receive in accordance with the filed and approved class plan.”

Schwartz’s analysis, it added, was faulty for not considering weighting requirements in California law.

Allstate further noted the department approved the rate filings in question in 2011.

Edward Cimini Jr., a department senior casualty actuary, said he attended depositions in the case and reviewed documents produced by Allstate and also concluded the company did charge higher rates for certain drivers in its Distinguished Driver program by giving them smaller discounts than required.

A department spokesman only acknowledged the case is slated for the hearing in May.

Operating companies of Allstate Corp. currently have Best’s Financial Strength Ratings ranging from A+ (Superior) to B+ (Good).

Shares of Allstate Corp. (NYSE: ALL) were trading the afternoon of Feb. 8 at $127.19, up 1.95% from the previous close.

(By Timothy Darragh, associate editor, BestWeek: [email protected])

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