Allstate Pulls ‘Deceptive’ Product in California

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Allstate has stopped selling California drivers its "Your Choice Auto" policies after a consumer group claimed the product was deceptive.

Bloomberg reported Tuesday that the Northbrook, Ill.-based insurance giant pulled the program early this week and will phase out coverage by November. Allstate will continue selling the policies in other states.

Although the Your Choice Auto program was initially approved by the California Department of Insurance, the Santa Monica, Calif.-based Consumer Watchdog group challenged it under Proposition 13, which requires insurers to participate in public hearings if asked to prove that their products are legal.

As described on Allstate's website, the Your Choice Auto program rewards policy holders for safe driving and doesn't raise rates if the individual is involved in an accident.

But Consumer Watchdog described the program this way in a press release:

Under the YCA program, Allstate charged drivers up to 15 percent higher-than-normal premiums with the promise that future tickets or accidents would not be used to increase premiums. But Consumer Watchdog's investigation found that these purported benefits were not worth the premium being charged.

According to the consumer group, Allstate was:
1. violating California's good driver discount law  
2. unfairly discriminating against drivers despite their good driving record
3. selling a deceptive product
4. encouraging irresponsible driving

It is estimated that Allstate was receiving $20 million a year in extra premiums since it began selling the program in California in 2008. Allstate agreed to stop selling the policies rather than face the formal Department of Insurance hearing into the legality of the program requested by Consumer Watchdog.

Allstate initially delayed providing Consumer Watchdog with data related to the development of the product, a transgression for which an administrative judge threatened to sanction the company.

According to Todd Foreman, a Consumer Watchdog staff attorney, Allstate subsequently provided the group with much of the documentation they had requested. But by avoiding a hearing, Foreman said, Allstate also ensured that the paperwork would remain confidential.

"It would have been better if we had been able to make this information part of the public record," said Foreman. "But our ultimate goal was to remove this product from the California marketplace, and that's what we did. It's a victory for consumers."

Allstate spokesman Bill Mellander did not respond to requests for comment but told Bloomberg that pulling the program would be good for the company.

"Transitioning away from YCA and putting this debate behind us puts us in a stronger position to introduce even better, stronger pricing and products for California consumers," said Mellander.  

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