Why GEICO and Allstate Will Be Hiking Their Rates

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With recent news of rate hikes for some of the biggest auto insurance companies, shopping around for the best price for your car insurance policy has never been more important. Settlements for big lawsuits and more costly claims have led both GEICO and Allstate to announce plans for rate increases in some markets, effective immediately.

GEICO and Allstate: Two Big Rate Hikes

Insurance Business America reported in August that GEICO customers in Illinois will see rate increases of 7.7% starting October 13, and new customers are already subject to these rate hikes. Insurance Business America says the increases will affect almost 183,000 customers who pay $202 million in premiums.

GEICO, through Insurance Business America, says that they are implementing the price increases because of recent losses due to “more frequent and costly claims.” Allstate also announced planned increases in premiums for car insurance because of losses.

Both GEICO and Allstate have announced plans for rate increases in some markets, effective immediately.

GEICO’s Big Lawsuit

The LA Times reports that GEICO settled with the California Department of Transportation for just over $6 million on August 24, 2015 over a discriminatory auto insurance pricing suit. GEICO denied wrongdoing, and since the suit settled, none was proven, but the details of the case only underline the importance of comparison shopping for car insurance.

According to the suit, the California Department of Transportation said GEICO (a subsidiary of Berkshire Hathaway) misquoted required policies for potential customers whom they deemed undesirable by up to 1,000%–and that was just for starting rates. The LA Times explained that GEICO was sued for, “misrepresenting the minimum automobile insurance policy of $15,000 per person and $30,000 per accident to potential customers it considered to be less desirable.” The LA Times continued, “They were given quotes stating that $100,000 per person and $300,000 per accident was the lowest available coverage.” The purpose: to scare off customers GEICO didn’t want to insure.

Who did the California Department of Transportation say GEICO deemed undesirable? According to the LA Times, the CDT said GEICO “Misrepresented information for customers who were unmarried, unemployed or employed in a low-wage occupation, had not obtained a four-year college degree and had gaps in insurance coverage.” So, they weren’t seen as bad investments because of their driving record.

GEICO, for their part, denied discriminatory practices and said they had no knowledge that their website misrepresented quotes. The LA Times says that in addition to paying $6 million now, the settlement requires GEICO to, “change its business practices and agree to biannual audits. If GEICO does not follow through with the audit plan for three consecutive years, the company would have to pay an additional $6 million.” California’s legislature will determine how the settlement money is allocated.

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How Your Insurance Rate Is Really Calculated

We’ve talked about how things unrelated to your driving record—like your credit score—can affect your car insurance rate. But facts about your lifestyle and personal history that are unrelated to your driving record—called “risk factors” by the insurance industry—might have more to do with how much you pay each month than you realize. Consumer Reports conducted a two-year data analysis of “more than 2 billion car insurance quotes in every US zip code” to discover what sample drivers would pay at leading insurance companies in various markets.

Consumer Reports found that, “Behind the rate quotes is a pricing process that judges you less on driving habits and increasingly on socioeconomic factors. These include your credit history, whether you use department-store or bank credit cards, and even your TV provider. Those measures are then used in confidential and often confounding scoring algorithms. And thanks to the availability of Big Data, companies have a lot more information to dig into.”

Consumer Reports notes that because the insurance industry is regulated by each state, getting a handle on why certain people are charged certain prices isn’t easy. For more details about the worst potentially discriminatory practices and for info about which insurers offer the fairest pricing (fair here is defined as how you drive and have driven, not by how an algorithm thinks you’ll drive in the future), check out Consumer Report’s rundown.

If you’re subject to a rate hike because your insurer claims profitability loss, or if you believe you’re not getting a fair shake based on your driving record with your current insurer, remember The Zebra has your back and you can always shop around and compare rates, and hopefully save some cash.

  • Cole Trickle

    I just dumped Allstate for State Farm and saved myself 800 a year for the SAME coverage. I was a loyal Allstate customer for 20 years but they keep screwing me over. I have no accidents or tickets and my cars keep getting older yet they still increase my rates? Screw you Allstate, I’m gone !!!

    • Cleatus Tank

      I am about to be in the same boat. I have just surpassed the over 35 mark, I still have a perfect driving record, and my cars value has decreased. My policy just increased $35 a month. That is a ridiculous jump!

  • John the Revelator

    Allstate just buggered me i see over 10%

  • Al is disgusted

    Just got my 2016 6 month premium notice and my rate has increased 14% I am now shopping.

  • Serge Skysi

    Say thanks to the intrusive government policies

  • James

    Infinity Auto Insurance (based in Birmingham, AL) increased my auto insurance rate Year-over-Year 38.4%. I am 30 years old, drive a 2008 hatchback, and have a squeaky clean driving record.