Four southern Illinois Allstate insurance policy holders filed a federal class action complaint alleging the insurer charges different rates to individuals with similar insurance risk in violation of state law.Whether Allstate's conduct constitutes an unfair or deceptive act or practice within the meaning of the Illinois Consumer Fraud and Deceptive Business Practices Act;
Robert Johnson, Anthony Richardson, Shelia Sydnor and Deborah Sparks allege Allstate currently utilizes – and has in the past utilized – credit scoring algorithms to calculate insurance premiums that produce vastly different results.
The class is represented by Stephen Tillery of St. Louis, Stephen Swedlow of Chicago, Walt Roper of the Cochran Firm in Dallas and David Burrow of Houston.
"Policyholders with identical risks can have different insurance scores and consequently different premiums," states the complaint filed in East St. Louis on Nov. 5.
"This practice not only violates state law but has caused measurable economic damages to an ascertainable class."
According to the complaint, Illinois law mandates that insurers treat like similar risks alike and different risks differently which is commonly referred to in insurance parlance as "fair discrimination."
The plaintiffs claims that Allstate performs all underwriting, rating and credit scoring for each private passenger automobile, homeowners', motorcycle and renters' policies that are written in the U.S. by any of the Allstate entities at its Illinois headquarters.
"To determine the price of insurance for each insured, Defendant's Illinois-based actuaries created proprietary credit scoring algorithms and methodologies," the complaint states.
Each plaintiff alleges they did not know of Allstate's simultaneous use of multiple and differing insurance scoring schemes that have continuously and systematically engaged in an unlawful pattern and practice of unfair discrimination against consumers nationwide in the determination of rates, premiums, policy pricing, and/or availability of insurance.
"The use of multiple and differing insurance scoring schemes is not based on sound actuarial principles," the complaint states.
"Nevertheless, Defendant has used multiple and differing insurance scoring schemes as a basis for charging varying premiums to its insureds with similar insurance risk."
According to the complaint, there is a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented that include:
Whether Allstate's practices violate the Illinois Consumer Fraud and Deceptive Business Practices Act;
Whether plaintiffs and class members have sustained damages and the proper measure of such damages; and
Whether plaintiffs and class members are entitled to punitive damages and/or civil penalties.
The plaintiffs allege Allstate violated the Illinois Consumer Fraud Act by engaging in unlawful schemes and courses of conduct with regard to the sale and marketing of its insurance through the omission, suppression and/or concealment of their use of multiple and differing insurance scoring schemes that result in higher premiums.
"Defendant engaged in such unlawful course of conduct with the intent to induce Plaintiffs and Class Members to purchase private passenger automobile, homeowners', motorcycle, and/or renters' insurance' and pay premiums above those charged to other Allstate insureds with similar insurance risk," the complaint states.
"Defendant's acts or practices are immoral and unethical as they serve only to benefit Defendant to the detriment of the consuming public," the complaint also states.
The plaintiffs also claim that Allstate received "millions of dollars" in revenue in which they were never entitled to receive.
"The injuries cause by Defendant's acts or practices, namely consumers' monetary losses, are not outweighed by any countervailing benefit to consumers or competition," the complaint states.
"Defendant's unfair acts served no purpose other than to increase its own profits."
The proposed class is seeking a judgment that orders the case to be maintained as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure, and compensatory damages, prejudgment interest, costs of suit, and attorneys' fees in excess of $5 million.
According to the complaint, all U.S. residents who purchased Allstate insurance from Aug. 1, 1999 through Sept. 15, 2007, are eligible to join the class if the insurance premium was calculated based in part on an insurance scoring algorithm.
United States District Judge Michael Reagan has been assigned the case.