<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=192888919167017&amp;ev=PageView&amp;noscript=1">
Monday, March 18, 2024
March 18, 2024

Linkedin Pinterest

Insurers accused of unfairly pricing premiums

The Columbian
Published:

CHICAGO — Showing loyalty to your insurance company won’t always result in a cheaper policy, according to the Consumer Federation of America.

The group Tuesday called out Northbrook, Ill.-based Allstate for using measures unrelated to risk to determine premiums, the monthly cost of insurance. The federation said Allstate uses factors related to consumers’ likelihood of “paying higher than appropriate premiums.” Basically, if a consumer is likely to stay with a particular company, insurers are more likely to increase rates.

And, the group said, companies do it without clearly disclosing the process to state regulators. Rules in every state require that premiums are based on a policyholder’s level of risk, according to the consumer advocacy group.

“Allstate’s insurance pricing has become untethered from the rules of risk-based premiums and from the rule of law,” said J. Robert Hunter, CFA’s director of insurance and the former Texas Insurance Commissioner. “Unfortunately, we believe that Allstate is not alone in using this new and patently unfair approach to auto insurance pricing; they are just the first to be unmasked.”

Allstate did not respond to a request for comment.

This practice of essentially penalizing loyal customers is called “price optimization,” a strategy made possible by sifting and analyzing customer data.

A free market generally allows for raising prices, but auto insurance in particular is different, because states require drivers to buy it. Consumer groups say low-income customers, who tend to have fewer market options, tend to shop around less than relatively wealthy consumers.

Loading...