Hearings on Allstate's auto insurance rates in California opened yesterday with a consumer group announcing that the company was overcharging drivers and Allstate responding that the charges were unfounded.
Allstate said it had already filed to reduce rates and the only disagreement was about how much. The statements were issued before the Department of Insurance hearing began in San Francisco.
The Foundation for Taxpayer and Consumer Rights (FTCR) said it had determined Allstate was overcharging drivers over $300 million per year.
FTCR said they wanted Allstate to lower its auto insurance rates by 18.8 percent, or an average $150 per car.
The hearing was being held under new rules that set limits on company profits.
FTCR said it was objecting to Northbrook, Ill.-based Allstate's request for five exemptions to the rate rules that determine auto insurance rates.
Nonprofit group FTCR said it will testify Allstate should be lowering its rates $300 million per year in accordance with the state regulations. FTCR has also challenged Allstate's proposed 12 percent increase in homeowners' premiums due to be heard at a separate hearing in January 2008.
"Regulators can't let Allstate bully its way to higher profits," said FTCR attorney Todd Foreman.
FTCR said in its statement that as it reads the written testimony submitted by Allstate for the current hearing, the insurer has "issued a thinly veiled threat to insurance regulators, suggesting that a company forced to abide by rules limiting excessive profit might: 'reduce the quality of its services to a level lower than what it would have otherwise been, by having fewer offices in the state, advertising less vigorously, or reducing the quality of its claims processing. Ultimately, a company might choose to leave the state entirely if long-term prospects are sufficiently poor.'"
Peter DeMarco, Allstate senior corporate relations manager for California, said in a statement: "FTCR's allegations do nothing to further Allstate's goal of lowering the cost of auto insurance for California consumers and bring new, innovative products to the market.
"The reality is we have over two million loyal auto customers in California who chose Allstate because of our competitive rates and our excellent customer service. We continue to attract hundreds of thousands of new auto customers each year in California and nearly 90 percent of our standard auto customers in the state choose to renew their policies with us. The numbers speak for themselves as far as our commitment to the market and our customer service.
"Furthermore, Allstate is committed to bringing new and innovative products to California auto consumers, including a version of Allstate Your Choice Auto, which when implemented will give customers more choice in their auto coverage than is currently available in the state."
He said that "Allstate has been willing to take a rate reduction comparable to those of other major competitors and has been working with the department to make a version of its innovative Allstate Your Choice Auto product available to California customers."
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