Allstate Responds to Mich. Consumer Advocate’s Call for Investigation

Michigan’s new insurance consumer advocate wants the state to investigate Allstate Insurance Company.

Melvin “Butch” Hollowell said Tuesday the insurer reported that Michigan’s drivers drastically reduced accidents for several years in a row. But the Detroit Free Press reports the company now is planning to raise rates, claiming the state’s drivers are among the worst in the U.S.

Northbrook, Illinois-based Allstate had said that between 1996 and 2006, Michigan drivers had 9,000 fewer accidents, a 54 percent drop. The company on September 18th sent a letter to Hollowell saying its safety reports on Michigan drivers were incorrect.

Allstate Spokesperson Karen Spica responded to Michigan’s Insurance Advocate Butch Hollowell request to the state’s Insurance Commissioner Ken Ross to investigate some ranking changes for Michigan cities recently made to the 2008 Allstate America’s Best Drivers Report. Spica said that Hollowell has alleged that Allstate is using the change in rankings to justify rate increases in Michigan.

“This is not so,” Spica said. “While Allstate increased its auto rates 4-7 percent on July 28, the report is unrelated to rate making.”

According to Spica, on July 1, Allstate released its annual 2008 Allstate America’s Best Drivers Report, which showed four Michigan cities ranking in the Top 10 among the country’s 200 largest cities.

“Since then, the state’s insurance advocate has referenced this report in numerous statements questioning Michigan’s high auto insurance rates given the reports results. This caused us to take another look at the raw data used to compile the rankings. In doing so, we discovered that the report had not taken into account Michigan’s unique standing as the nation’s only No-Fault property damage (PD) state,” Spica said. “Allstate actuaries determined that the discrepancy existed because, unlike the other 48 states where Allstate does business, Michigan’s property damage ledger as a general rule does not contain payouts for damages to other vehicles if an Allstate insured was involved in a moving vehicle accident. The distinction between Michigan’s current system and that in other states is probably more clearly understood when the costs for such coverages are compared: in Michigan, it costs around $25 for this type of coverage, while in other states it runs about $150.”

Spica also said tht Allstate’s auto policies represent about 12 percent of all U.S. auto policies, making the report a realistic snapshot of what’s happening on America’s roadways. Since auto collisions in Michigan were not properly accounted for in the data and indeed were underreported, the data was skewed to generate a more favorable ranking for Michigan cities than was actually warranted. Adjusting the data to account for this meant that the Michigan cities dropped significantly in the rankings.

“Prior to officially releasing the revised rankings to Michigan media on Sept. 19, we sent a copy of the revised data (along with a letter explaining the discrepancy) to Insurance Advocate Hollowell, as well as Insurance Commissioner Ken Ross,” Spica said. “We also offered to meet with them regarding the revised report. We look forward to the opportunity to meet with Mr. Hollowell to discuss the report and its findings in greater detail.”

The Associated Press and Allstate contribued to this story..