Santa Monica, CA -- Allstate Insurance has agreed to stop selling its aggressively marketed "Your Choice Auto" (YCA) insurance program in California, in response to a challenge brought by the nonprofit Consumer Watchdog. As of today, Allstate will no longer issue new YCA policies, which Consumer Watchdog considers deceptive and overpriced, and by November 2011, the approximately 150,000 existing YCA policies in California will be phased out completely. Allstate will continue to sell these policies in other states, which do not have the same strong consumer protection laws as California.
Under the YCA program, Allstate charged drivers up to 15% higher-than-normal premiums with the promise that future tickets or accidents would not be used to increase premiums. But Consumer Watchdog's investigation found that these purported benefits were not worth the premium being charged. According to the consumer group, Allstate was:
- violating California's good driver discount law;
- unfairly discriminating against drivers despite their good driving record;
- selling a deceptive product; and
- encouraging irresponsible driving.
It is estimated that Allstate was receiving $20 Million a year in extra premiums since it began selling the program in California in 2008. Allstate agreed to stop selling the policies rather than face the formal Department of Insurance hearing into the legality of the program requested by Consumer Watchdog.
“Your Choice Auto became a cash cow for Allstate by charging customers more than they should be paying under California’s good driver law,” said Todd M. Foreman, in-house counsel for Consumer Watchdog. “Only when faced with the threat of having their executives cross-examined about the actual costs and benefits of YCA did Allstate finally agree to take this product off the market.”
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 agreement by Allstate to remove YCA from the California market was approved by then-Commissioner Poizner on December 20, 2010, with an effective date of January 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 August 5, 2010 order, Administrative Law Judge Kristin L. Rosi, in a sweeping ruling, granted Consumer Watchdog’s requests, stating that:
“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 whose prior work with Consumer Watchdog led to an historic $500 million savings for Allstate auto and home insurance policyholders in 2008. “This settlement ensures that all Allstate policyholders are subject to the same rules and are charged a fair
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.
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Consumer Watchdog is a nonpartisan nonprofit organization with offices in California and Washington, D.C.