Allstate car insurance 'suckers list' overcharging
Occurred: February 2020
A joint investigation by The Mark Up and Consumer Reports has found that Allstate, the fourth largest insurer in the US, has been increasing premiums on to a 'suckers list' of customers already paying the highest rates for their insurance, while keeping premiums more or less the same for 'thriftier' customers.
To identify the 'suckers', Allstate devised a 'customer retention model' or 'advanced' price adjustment algorithm that was said to contain dozens of variables that would adjust insurance premiums in the direction of the company's new risk model.
But, according to the investigators, the model was actually very simple: it identified existing big spenders and squeeze more money out of them than others.
The algorithm also determined customers which customers were owed discounts. Though some customers were owed thousands of dollars, Allstate capped the discounts at a half percent irrespective of the amount owed. Senior customers were overrepresented within this cohort.
Insurers are not obliged to inform customers if they are denied discounts, and the National Association of Insurance Commissioners told The Markup that it had never heard of an insurer voluntarily informing its customers that they had been denied a discount.
Maryland rejected Allstate’s proposal on the grounds that it was discriminatory. But it was approved by Arizona, Arkansas, Wisconsin, and a number of other states.
Sector: Banking/financial services
Purpose: Assess customer risk
Technology: Price adjustment algorithm
Issue: Bias/discrimination - age, income
Transparency: Governance; Black box; Marketing
- Cooney P., Phillips E., Rivera J. (2019). Auto Insurance and Economic Mobility in Michigan: A Cycle of Poverty
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Published: March 2023