Allstate has settled a class action suit alleging the carrier engaged in a nationwide practice of racial discrimination in premium pricing through its use of customer credit scores.
The case, filed in 2001 in U.S. District Court, Western District of Texas San Antonio division, was brought by seven individual Allstate customers seeking to represent a nationwide class of African-Americans and Hispanics allegedly discriminated against in personal lines policy pricing due to their credit scores.
U.S. District Judge Fred Biery gave preliminary approval to the agreement Friday.
Allstate spokesman Michael Trevino said the company took the action to avoid protracted litigation.
Lead plaintiff's attorney Christa Collins said the importance of the settlement lay in the fact that Allstate has agreed to change the way it uses credit information to price insurance.
Allstate will take the following actions under the terms of the settlement:
o Allstate will rollout a new insurance scoring model and make it available publicly.
o Allstate will provide its customers with the opportunity to have an insurance policy priced using its new insurance scoring model.
o Allstate will deliver a comprehensive education program to class members on how credit can be used and scores improved.
o Allstate will adopt an appeals program under which customers who experience extraordinary events that negatively affect their credit history can potentially obtain premium reductions.
o Class members will be entitled to apply for a one-time monetary payment. Eligibility for this payment will be determined based on a comparison of the insurance scoring group assigned to his or her Allstate policy and the insurance scoring group assigned under the new model.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.