Nearly two million drivers affected
KGO-TV ABC-7 News – San Francisco, CA
SAN FRANCISCO, CA — Some two million drivers insured by Allstate in California have a stake in the outcome of hearings underway this week. Consumer advocates and the Department of Insurance says Allstate has overcharged its customers.
The Foundation for Taxpayer and Consumer Rights (FTCR) claims Allstate Insurance Company is overcharging California customers by some $300-million dollars a year. Using a new formula to determine rates, the Department of Insurance agrees.
“When we tested Allstate‘s rates using these new regulations it showed that Allstate‘s rates were excessive,” said Donald Hilla Jr. from the California Department of Insurance.
That’s why Allstate is appearing before an administrative law judge to justify the rate it’s trying to charge customers. Allstate is offering to lower rates, but not nearly as much as the insurance department suggests.
“They actually came in originally with an increase, and then shifted it to a decrease. Their decrease is around seven percent. Ours is around 18.8,” said Hilla Jr.
That’s a difference that amounts to $150 dollars a year in average car insurance premiums. Allstate is using complex actuarial charts to try to prove such a drop in rates could hurt the company financially.
“It would cause us you know some difficulties and get us to a place we couldn’t could potentially not cover our loss cause, and have a rate much below what many of our competitors have in the state,” said Assistant VP of Allstate Insurance Co. Floyd Yager.
The Foundation for Taxpayer and Consumer Rights says Allstate‘s claims of potential financial hardship are not credible.
“Last year in 2006 Allstate had net profits of $5 billion dollars. We should all have that kind of deep financial hardship,” said attorney Daniel Zohar.
Earlier this year, Allstate announced it would no longer offer new homeowners policies in California, and in papers filed with the insurance department suggested it might stop offering auto insurance too.
Earlier on Monday, Allstate released a statement saying: “The reality is we have over two million loyal auto customers in California who chose Allstate because of our competitive rates and our excellent customer service. We continue to attract hundreds of thousands of new auto customers each year in California and nearly 90-percent of our standard auto customers in the state choose to renew their policies with us. The numbers speak for themselves as far as our commitment to the market and our customer service.”
Hearings will continue for a couple more days. A decision could come in a few months, but likely will be appealed.
