Following challenges Consumer Watchdog filed under a California's voter-approved insurance reform law, Allstate customers with homeowners' insurance policies will get an overall 12.6 percent rate reduction, effective this month, the Santa Monica-based nonprofit announced.
As a result of the group's challenges to the insurer's “excessive” rates, policy holders will save nearly $72.5 million, amounting to an average annual savings estimated at $230 per policy, said Carmen Balber, Consumer Watchdog executive director.
Eligible policyholder who renew in February will see those savings immediately, while eligible policy holders who have already renewed this month will get refunds, she said in a news release.
“California homeowners are finally getting an overdue rate cut from the $72 million a year they were overpaying for their Allstate insurance coverage,” said Balber.
Consumer Watchdog in 2014 conducted a market analysis of Allstate's renters' and homeowners' insurance rates from 2010 to 2013 and found the company was overcharging customers, according to Balber.
The nonprofit consumer advocacy group then used provisions of 1989's Proposition 103 to challenge the overcharges through a public hearing process.
The sweeping insurance reform measure gave consumers the right to “intervene,” or participate, in California's rate regulation administrative process.
“When the amount they pay out in claims plummets, and their profits soar, insurance companies are required by voter-approved Proposition 103 to lower the rates they charge to consumers,” said Pam Pressley, senior attorney for Consumer Watchdog.
“Even though claims have gone down over the last five years, Allstate had failed to reduce its rates accordingly. That is why Consumer Watchdog demanded a hearing, and the company agreed to reduce its rates.”
In July 2014, the consumer group petitioned the state Department of Justice to take action by holding a hearing. Although the department declined to set a hearing, Allstate was ordered to justify its rates by making a rate filing.
In May of last year, Allstate filed a 6 percent overall rate decrease, which Consumer Watchdog determined was not enough, based on the nonprofit's independent analysis, said Balber.
Allstate ultimate agreed to the 12.6 percent overall rate reduction after negotiations with Department of Justice and Consumer Watchdog attorneys, said Insurance Commissioner Dave Jones in announcing the agreement Friday.
“Reducing Allstate's home insurance rates is a big help for families as incomes fail to keep pace with family expenses,” said Jones. “Once again, Californians have benefited from the insurance commissioner's rate regulation authority for home insurance rates and the public intervenor process.”