Thursday, 20 January 2011 17:46

Allstate Phases Out Your Choice Auto Program in California

Allstate Insurance has agreed to stop selling "Your Choice Auto" (YCA) insurance program in California, in response to a challenge brought by the nonprofit Consumer Watchdog. The company has stopped issuing new YCA policies, and will completely phase out the approximately 150,000 existing YCA policies in California by November 2011.

Consumer Watchdog said the program is "deceptive and overpriced," asserting that 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. The consumer action group said an investigation it conducted found that the 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; and
4. Encouraging irresponsible driving.

Consumer Watchdog estimates that Allstate was receiving $20 million per year in extra premiums since it began selling the program in California in 2008. Allstate agreed to stop selling the policies after the group requested a formal hearing on the legality of the program with the state Department of Insurance.

Although the YCA program had been initially approved by the California Department of Insurance, it was challenged by Consumer Watchdog under Proposition 103, which sets guidelines for legal insurance practices and products in California, the group said.

The agreement by Allstate to remove YCA from the California market was approved by then-Insurance Commissioner Steve Poizner on Dec. 20, 2010, with an effective date of Jan. 10, 2011. Prior to that agreement, Consumer Watchdog had secured an order from an administrative law judge to compel Allstate to release thousands of pages of documents and data related to the development of YCA. In that Aug. 5, 2010 order, Administrative Law Judge Kristin L. Rosi, said, "Allstate fails to demonstrate any substantial justification for its delay in producing such data and its failure to comply borders on bad faith. Accordingly, Allstate's failure to comply with this Order may subject Allstate to contempt sanctions pursuant to Government Code Section 11455.10(e)."

Once compelled to produce the requested documents, which allowed Consumer Watchdog and its experts to further probe the legality of YCA, Allstate soon requested that the matter be resolved before trial.

"When we exposed the truth about how this program led good drivers to vastly overpay for insurance, it became clear that the only way for Allstate to comply with the law was to stop selling the YCA policies," said Daniel Y. Zohar of the Zohar Law Firm in Los Angeles, lead outside counsel for Consumer Watchdog. "This settlement ensures that all Allstate policyholders are subject to the same rules and are charged a fair premium."

Prop 103 requires insurance companies to open their books and submit to public hearings to justify that rates are not excessive and insurance products are legal. Consumers may intervene in or initiate proceedings to challenge any rate or product that violates Prop 103. Using Prop 103, Consumer Watchdog has helped Californians save about $2 billion dollars by challenging auto, homeowners and medical malpractice insurance rate proposals since 2003.

Consumer Watchdog is a nonpartisan nonprofit organization with offices in California and Washington, D.C.

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