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Allstate’s Algorithm

Texas Drivers Sue Allstate over Secret “Suckers List”

A joint investigation by The Markup and Consumer Reports was cited in a lawsuit over discriminatory car insurance rates

A photo of a road sign that reads "Welcome to Texas. Drive Friendly – The Texas Way"
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On April 28, a group of current and former Allstate Corp. insurance policyholders sued the company, alleging that it had engaged in discriminatory pricing practices, including using a secret algorithm that The Markup and Consumer Reports uncovered and reported about in February. The complaint was filed in the Austin division of the United States District Court for the Western District of Texas. 

The suit alleges that “Allstate essentially has carte blanche to pick the rate that it will charge each policyholder” using the secret algorithm. It claims that Allstate viewed longtime customers as less sensitive to premium price changes and alleges that those customers were “generally charged higher premiums for the same policies and coverages than otherwise identically situated customers with less tenure.”

Allstate essentially has carte blanche to pick the rate that it will charge each policyholder.

The suit against Allstate

The suit cites the joint investigation by The Markup and Consumer Reports, whose analysis of Allstate customer data from a Maryland filing (which was withdrawn before it was put into effect) found that customers who were already paying some of the highest rates would have also been charged rate hikes of up to 20 percent, compared to more limited increases of up to 5 percent for similarly situated customers who had been paying cheaper rates. The analysis also found that no customer would have received a substantial decrease, with rate decreases capped at half of one percent.

Allstate spokesperson Shaundra Turner Jones responded to the report by The Markup and Consumer Reports saying that Allstate’s rating plans comply with state laws and regulations and that the reporting on the Maryland filing was “inaccurate and misleading” because it was “based on a rating plan that was never used.” 

The Texas lawsuit also claims that Allstate charged customers differently depending on what “book” they were in. Allstate maintains several auto insurance companies (referred to as “books of business” in the insurance industry) that issue insurance policies to customers. While some of those books are “open,” meaning that they take new customers, several of the Allstate books operating in Texas are “closed,” meaning that they only work with pre-existing customers. 

The suit alleges that “the premiums that Allstate charges new policyholders in the Open Books are generally significantly lower (often, very significantly so) than the premiums Allstate charges existing policyholders in the Closed Books for the same or materially the same coverages.”

In an email to The Markup, Allstate spokesperson Roberto DeLeon said, “There is no merit to this complaint. We pair quality, customized coverage with great savings and reward long-term customers for their loyalty.”

Texas law prohibits insurers from treating policyholders differently “without a sound actuarial basis.” The suit alleges that Allstate knowingly violated this prohibition as early as 2015, when the company was sent a letter by the Texas Office of Public Insurance Counsel (OPIC), an agency independent from the state’s insurance department, stating that the retention model it was proposing violated multiple Texas laws.

Deeia Beck, public counsel for OPIC, wrote that “allowing clearly non-risk-and-cost-based rating factors opens the door to further conditions where certain classes of consumers are unfairly priced out of the market or shunted into low quality products.”

In explaining the differences between accepted insurance practices and what Allstate was doing, Beck noted that “discriminatory intent is introduced” when insurers introduce “for example, a 25% rate cap for older drivers and a 40% cap for youthful drivers.” 

The Markup’s and Consumer Reports’ analysis of Allstate customer data in Maryland found that customers hit with a 20 percent increase were more likely to be middle-aged.

It seems Allstate continued its use of the retention model even after receiving the OPIC letter: The Markup and Consumer Reports found a July 2016 letter from Allstate representatives to the Ohio Department of Insurance that claimed that the company was still using the retention model in Texas at that time but that it was under “active review.”

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