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Allstate drops 'accident forgiveness' policy in California

January 13, 2011 |  2:13 pm

Allstate Insurance Co. and two related insurers have agreed to stop selling their heavily advertised Your Choice Auto policies.

The Northbrook, Ill., company that provides auto insurance coverage to 1.5 million California households stopped offering the policies to new customers on Jan. 1, spokesman Bill Mellander said. The approximately 10% of Allstate California customers who purchased such coverage will be phased into standard policies during the second half of the year, he said.

The policies offered an "accident forgiveness" feature that television advertisements touted would result in motorists not getting their rates automatically increased after an accident or a traffic ticket.

The switch is part of a broad reappraisal of Allstate's California auto insurance business that' "would allow us to focus on some bigger and better pricing and underwriting practices," Mellander said.

Policyholder advocates, who formally asked for an investigation by the state Department of Insurance of Allstate's Your Choice Auto program, scoffed at Allstate's contention.

Santa Monica-based Consumer Watchdog charged that Allstate's policy violated Proposition 103, an initiative approved by voters in 1988. The new law gave the state insurance commissioner increased powers to regulate property and casualty insurers.

"We were saying that it's deceptive and unfair" by charging customers 15% higher than normal premiums with the promise that some future accidents and traffic tickets would not be used as the basis for hiking rates, said Douglas Heller, Consumer Watchdog's executive director.

The department subsequently ordered an administrative law judge to open a legal proceeding to look in to the allegations against Allstate. As part of the hearing, the judge ordered Allstate to release publicly a large volume of documents detailing the operation of the Your Choice Auto program in California.

"Allstate made the decision to pull its product off the market" prior to releasing any information, said Ioannis Kazanis, a spokesman for Insurance Commissioner Dave Jones.

-- Marc Lifsher