Contra Costa Times (California)
SAN FRANCISCO, CA — Hundreds of thousands of Allstate Insurance customers in California who own homes or drive cars could be in line for a refund following a $30 million settlement Monday between Allstate and insurance regulators.
Customers who had a vehicle or homeowners insurance policy with Allstate from 1999 through 2004 are those affected by the settlement, officials with the insurer said. Allstate agreed to provide $30 million in policy credits and premium returns as well as pay a $4 million fine.
Allstate did not admit to any wrongdoing. About 8 percent of Allstate‘s policy holders in California are expected to be affected, estimated Rich Halberg, an Allstate spokesman. That could amount to roughly 250,000 policy holders.
“Our intent is to resolve a number of disputes that amount to differences in interpretation of the law,” said Rich Halberg, an Allstate spokesman. “We wanted to settle and remove this barrier to a good relationship with the Department of Insurance. We are pleased to have things clarified and to move on.”
The commissioner also warned that regulators will crack down on any carriers that act improperly.
“Any insurance company that gets out of line for cheating its customers can expect to be hammered,” Garamendi said. “Don’t even think about harming your customers.”
Officials would not disclose the anticipated average refund per policy holder. But if distributed evenly among 250,000 policy holders, that would amount to $120 each. There is no guarantee the distribution will be uniform.
Potential problems came to the Insurance Department’s attention in 2000. In 2002, the agency’s investigators, with cooperation from Allstate, looked into the company’s practices. The insurance department alleged that it found a series of issues:
– Allstate used a form of credit scoring, or financial stability, to underwrite property coverage. That resulted in some consumers being charged higher rates.
– Allstate failed to charge the lowest premium for which a customer was eligible when the customer renewed a policy.
– Allstate failed to provide its home and auto discount to policy holders who had both lines of insurance with the company.
– Allstate used a prior renters’ insurance coverage to place some consumers in programs with higher rates.
The Department of Insurance also found that Allstate “failed to offer and sell to good drivers the lowest rated program from its insurer group,” according to a filing by the state agency in the matter. The agency also claimed Allstate “improperly calculated mileage” for vehicle policies.
In all, investigators found at least 39 instances of improper actions during the department’s probe at the Allstate offices, a state filing said.
“Allstate had cheated its customers with a series of arbitrary and unfair actions,” said Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights.
Heller was particularly annoyed by the credit scoring.
“If you show up as a person with the right number of credit cards and who gets a high credit score, they will give you a deal on homeowners insurance,” Heller said. “But they’re giving you that deal because they want to sell you a lot of life insurance.”
As part of its settlement, Allstate also agreed to review its claims handling practices for the 2003 Southern California wildfires and to take corrective actions. The settlement will not change any claim payments resulting from that disaster.
“This is something of a universal settlement,” Heller said. “This addresses a lot of the problems that have raised the ire of California consumers.”
One consumer who is angry with Allstate is Walt Morosco, a Simi Valley resident whose home was devastated by the Northridge Earthquake of 1994. He was displeased with how Allstate kept switching claims adjusters on his property, and filed a federal lawsuit against the company. He lost his case.
“This settlement is a turn in the right direction,” Morosco said. “The playing field with insurance companies is so uneven that anything to level the playing field would be a great plus.”
The Allstate Insurance settlement applies to California policy holders who had an automobile or homeowners insurance policy with the company from 1999 through 2004. Allstate and the Department of Insurance do not have any estimates on how much any policy holder might receive. Allstate intends to contact affected customers directly by mail or through inserts in their premium notices. Customers, however, can contact Allstate prior to hearing from the company through a toll free number.
Phone number: 800-351-0646
Hours: Monday through Friday, 9 a.m. to 5 p.m.
George Avalos covers the economy, financial markets and banks. Reach him at 925-977-8477 or [email protected]