Los Angeles, CA – Insurance Commissioner Ricardo Lara should reject Allstate’s proposed $165 million auto insurance rate hike and its two-tiered job- and education-based discriminatory rating system, wrote Consumer Watchdog in a letter sent to the Commissioner today. The group called on the Commissioner to adopt regulations to require all insurance companies industrywide to rate Californians fairly, regardless of their job or education levels, as he promised to do nearly three years ago. Additionally, the group urged the Commissioner to notice a public hearing to determine the additional amounts Allstate owes its customers for premium overcharges during the COVID-19 pandemic, when most Californians were driving less.
Overall, the rate hike will impact over 900,000 Allstate policyholders, who face an average $167 annual premium increase.
Under Allstate’s proposed job-based rating plan, low-income workers such as custodians, construction workers, and grocery clerks will pay higher premiums than drivers in the company’s preferred “professional” occupations, including engineers with a college degree, who get an arbitrary 4% rate reduction.
“Allstate’s two-tiered system is illegal under voter-approved Proposition 103, which prohibits the use of education and occupation as rating factors,” said Consumer Watchdog attorney Pamela Pressley. “Rather than continuing to approve individual companies’ discriminatory rating plans like Allstate’s, Commissioner Lara needs to follow through on his three-year-old promise to stop unfairly discriminatory rating practices based on occupation on an industry-wide basis.”
The Insurance Commissioner has failed to act on a regulation proposed three years ago to curb job- and education-based rate discrimination.
Consumer Watchdog and ten community and civil rights organizations challenged auto insurers’ illegal and discriminatory use of job and education in setting rates in February 2019, in a petition to the Commissioner to adopt regulations to end the practice industrywide. In September 2019, a Department of Insurance investigation confirmed that “wide socioeconomic disparities” are created by insurance companies surcharging California drivers based on nothing more than their occupation or educational status. Three years later, Commissioner Lara has yet to adopt a regulation to stop the practice, and the last workshop on a potential regulation held by the Department of Insurance was nearly a year and a half ago.
Consumer Watchdog also called on the Commissioner to notice a public hearing to determine the amount of additional premium overcharges that Allstate owes its California policyholders due to their reduced driving during the period the state’s COVID-19 stay-at-home orders were in effect from at least March 2020 to June 2021. According to Consumer Watchdog’s analysis, Allstate has so far only provided premium credits totaling less than half of the amount that the company overcharged customers during that time period, leaving hundreds of millions of dollars more owed. The Commissioner issued a letter to Allstate on October 5, 2021, confirming that “the PPA [private passenger auto] policyholders of Allstate Northbrook Indemnity Company should have received substantial additional PPA premium refunds or credits.” But to date, the Commissioner has taken no further action publicly to ensure that Allstate’s policyholders receive the refunds they deserve, according to Consumer Watchdog.
Read Consumer Watchdog’s Letter to the Commissioner.
Over the last two months, Consumer Watchdog has filed challenges against proposed auto insurance rate hikes by another three of the largest auto insurers in the state—Mercury Insurance Company, Interinsurance Exchange of the Automobile Club (“Auto Club”), and GEICO—that also utilize job- and education-based discriminatory rating systems and owe additional amounts for premium overcharges during the COVID-19 pandemic.
Read the community and civil rights groups’ 2019 petition.
Voter-approved Proposition 103 requires auto insurance premiums be based primarily on three mandatory factors—driving safety record, annual mileage, and years driving experience—and prohibits unfairly discriminatory rates. Occupation and education have never been approved by regulation as lawful rating factors under voter-enacted Proposition 103. Proposition 103 prohibits this kind of unfair rate discrimination, which can serve as a proxy for income or race.
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