Allstate Insurance Company has agreed to pay a $4 million fine and provide more than $30 million in policy credits and premium returns to customers whom California regulators say were overcharged for home and auto coverage.
California Insurance Commissioner John Garamendi announced the agreement with the company. The Northbrook, Ill.-based insurer admitted no wrongdoing in the matter.
The case involved Allstate's practices from Jan. 1, 2000 to April 12, 2002. During this time, Allstate employed a "Financial Stability" process for rating customers, which in the opinion of Commissioner Garamendi was a form of credit scoring that placed some consumers in programs with higher rates. California does not permit credit scoring for auto insurance.
Norm Williams, a spokesperson from the California Department of Insurance, said the practice "can be discriminatory in its impact and that any insurer that wants to use it [in California] must prove to the commissioner that it does not discriminate, but Allstate did not do so."
Allstate has since discontinued the disputed practices in the state and Rich Halberg, a company spokesperson, said the settlement could affect up to 250,000 policies, which represents roughly 8 percent of the company's policies in California.
As part of the settlement, Allstate also agreed to review its process for handling claims with respect to the 2003 California wildfires. Mr. Halberg stated that the review was not related to the rate claims allegations but does represent "the full and final resolution of all administrative action resulting from the wildfires."
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