A consumer group yesterday accused Allstate Corporation of unjustifiably raising home and automobile insurance rates and using questionable practice to settle claims.
The charge by the Consumer Federation of America was made in a report titled "The Good Hands Company, or a Leader in Anti-Consumer Practices?" accusing the company of putting its profit making ahead of the interests of its policyholders.
"Allstate is certainly not the only insurer pursuing these anti-consumer practices, but it has been in the vanguard in developing and implementing many of them," said J. Robert Hunter, CFA's director of insurance.
For its part, the Northbrook, Ill.-based insurer denied the report's accuracy.
"We have already identified many inaccuracies," said Mike Siemienas, an Allstate spokesman, who added the company had just gotten the report today and was in the process of reviewing it. "The fact is that 17 million households can't be wrong. Allstate is proud of its 75-year history of meeting its customer's needs."
Mr. Siemienas said the company was still reviewing the report and was not yet ready to point out the errors.
The report said Allstate's payout in claims relative to premium was out of balance to the rest of the industry. The company paid out 73 percent of premium in benefit from 1987 to 1996, "and a startlingly low 59 percent from 1997 to 2006."
CFA called into question the carrier's claim settlement practices, saying it underpaid claimants compared to the rest of the industry. From 1993 to 1996, the company's paid severity dropped by 21 percent to 79, while industrywide payments dropped to 94. Since 1996, the carrier's severity increased to 98, while the industry stood at 117. Overall, the carrier reduced its payouts on these claims by almost 20 percent relative to the industry, the report said.
On the topic of Hurricane Katrina in 2005, CFA said Allstate "has proven to be a fair weather friend" dropping thousands of customers, notably in Florida, while increasing its automobile market share in that state.
It also accused the company of:
o A complex rating and underwriting system it said makes it difficult for consumers to shop for insurance.
o Increased complaint ratio from its consumers, having the second worst complaint ratio among eight major home insurers in 2005 and the lowest ranking in 2006.
o Shifting costs to taxpayers by underpaying claims for wind damage and shifting the costs to the flood insurance program. It also cited newspaper investigations that accused the carrier of charging the government more for materials to repair flood damages than it paid for the same materials to repair wind damages.
A copy of the report can be found at: www.consumerfed.org/pdfs/Allstate_Report_07/18/07.pdf.
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