Allstate Corp. will no longer issue new "Your Choice Auto" policies in California.
Consumer education and advocacy organization Consumer Watchdog said that comes in response to a challenge by the group, which said it considers the policies to be "deceptive and overpriced."
Allstate spokesman Bill Mellander, however, said the decision to stop offering YCA to new customers in California, effective Jan. 1, was a "strategic business decision that we made as part of a bigger package of business conversations that we've been having here in the state.
"It's a decision that we made on our own because we felt that, moving forward, bigger picture, it will better enable us to offer even better-priced, more competitive products and services in California. . . and significantly enhance the competitive position of our agencies," he added.
YCA, which includes features like accident forgiveness, deductible rewards and the "Safe Driving Bonus" check, was introduced in 2004 and is now available to consumers in 46 states, according to Allstate's website.
Mellander said Allstate has about 150,000 YCA policies in force in California. "Over the course of this year, those existing customers, primarily in the third and fourth quarters, will be transitioned to a standard auto protection package for California. They will retain the benefits they have earned over the course of the time that they were gold or platinum YCA customers just within or in addition to the coverages that come with the basic package."
Consumer Watchdog said YCA policies included 15% higher-than-normal premiums in exchange for promises that future tickets or accidents would not increase the premiums. It also accused Allstate of violating California's good driver discount law; unfairly discriminating against drivers despite their good driving record; selling a deceptive product; and encouraging irresponsible driving.
The nonprofit group challenged the YCA policies under Proposition 103, which requires insurance companies in California to justify that rates are not excessive and insurance products are legal. Consumers may intervene in or initiate proceedings to challenge any rate or product that violates Proposition 103.
"Proposition 103 enacted consumer protections and particular requirements for property/casualty insurance in the state, including a requirement that rates are not unfairly discriminatory nor are they excessive," said Consumer Watchdog staff attorney Todd M. Foreman. "In addition, there was a requirement that statutory good drivers receive a 20% lower premium than they otherwise would. We determined the YCA program violated the good driver discount rule. Also, rates were excessive in that they were not accurately priced."
In early 2010, the California insurance commissioner issued a notice of hearing, set for Dec. 4, 2010, he said. "In preparation for that, both Allstate and Consumer Watchdog filed preliminary testimony and exhibits in support of the program. Ultimately, Allstate decided instead of going through the formal hearing to withdraw the program." The agreement to remove YCA from the California market was approved by then-Commissioner Steve Poizner in December 2010, said Foreman.
Mellander said Allstate will continue to sell YCA policies in other states and "is committed to the YCA product line. It is probably the single best example now of the innovations we bring to the marketplace."
Allstate Insurance Group currently has a Best's Financial Strength Rating of A+ (Superior).
Allstate (NYSE: ALL) shares were trading at $30.68 on the afternoon of Jan. 13, down 0.42% from the previous close.
Contact the author, Lori Chordas, senior associate editor, Best's Review at: [email protected]