We expect companies to appreciate long-term customers, perhaps even give them special consideration in some way. But this class action alleges that the Allstate Corporation does the opposite with its auto insurance customers. The complaint claims that Allstate maintains two schemes for charging different rates to policyholders for what are materially the same policies.
1. Closed and Open Books
The “books” here pertain to Allstate companies. Allstate considers its Allstate Indemnity Company and Allstate County Mutual Insurance Company-Classic to be “closed”—that is, maintaining existing customers but not taking new customers. It considers its Allstate Fire & Casualty Insurance Company and Allstate County Mutual Insurance Company to be “open”—that is, taking new customers.
Allstate offers generally lower prices on the policies offered by its open entities, even though the policies are substantially the same as the policies of its closed entities. However, it tries to prevent existing customers from switching from the closed to the open entities, the complaint says, in the first place by concealing the difference in pricing.
The complaint says, “Allstate trains and instructs Allstate Texas agents not to switch existing Closed Book customers to Open Books, or even to tell them about the Open Book and its lower available rates except in very rare circumstances.” It may penalize or even terminate agents who violate this policy.
2. Price Tolerance
Allstate has also found a way to raise prices on customers who remain on the open books with Allstate Fire & Casualty for a while. According to the complaint, it tries to determine how much tolerance customers have for increased premiums and then raises them accordingly.
Since June 2014, the complaint says, “Allstate unilaterally assigns each Allstate F&C Texas policyholder into one of approximately 922 million Allstate ‘microsegments’…” Each microsegment has a “CGR” factor, the complaint claims, “that acts as a premium ‘multiplier’ increasing … or decreasing … the premium that would otherwise apply to the policyholder…. The CGR factor is applied as the last step in the process of calculating the policyholder’s premium.”
The complaint says that the application of this CGR factor can increase the policyholder’s premium by up to 850% or decrease it by up to around 90%, thus resulting in drastically different premiums being charged, for the same policies and coverages.”
The complaint alleges violations of the Texas Insurance Code.
Two classes have been defined for this action.
The Open/Closed Class is all Allstate Texas personal auto policyholders who, between January 1, 2008 and the present, had an active policy underwritten by Allstate Indemnity Company or Allstate County Mutual Insurance Company-Classic.
The Price Tolerance Class is all Allstate F&C Texas personal auto policyholders who, for any policy period between June 26, 2014 and the present, were assigned by Allstate to a microsegment with a corresponding CGR factor.
Article Type: LawsuitTopic: Insurance
Most Recent Case Event
Allstate Higher Prices for Loyal Customers Texas Complaint
May 28, 2020
We expect companies to appreciate long-term customers, perhaps even give them special consideration in some way. But this class action alleges that the Allstate Corporation does the opposite with its auto insurance customers. The complaint claims that Allstate maintains two schemes for charging different rates to policyholders for what are materially the same policies.
Allstate Higher Prices for Loyal Customers Texas ComplaintCase Event History
Allstate Higher Prices for Loyal Customers Texas Complaint
May 28, 2020
We expect companies to appreciate long-term customers, perhaps even give them special consideration in some way. But this class action alleges that the Allstate Corporation does the opposite with its auto insurance customers. The complaint claims that Allstate maintains two schemes for charging different rates to policyholders for what are materially the same policies.
Allstate Higher Prices for Loyal Customers Texas Complaint