Allstate Hit with Class Action Over ‘Insufficient’ Premium Refunds During Pandemic

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A proposed class action alleges Allstate Northbrook Indemnity Company unfairly profited from the COVID-19 pandemic by continuing to charge and collect excessive premiums in 2020 and 2021, when there was a dramatic reduction in driving, without adequately refunding customers. 

The 16-page lawsuit contends that Allstate’s “Shelter-In-Place Payback” program, which applied a 15 percent premium credit for only March, April and May 2020, was inadequate to properly compensate customers for overpayments stemming from the pandemic, when stay-at-home measures dramatically reduced driving and the number of driving-related accidents. Moreover, even though Allstate reported that it offered “additional, even smaller” refunds in 2020 and 2021, these amounts were nevertheless insufficient as far as compensating consumers who paid allegedly excessive premiums, the case says. 

“Indeed, in October 2021, the California Insurance Commissioner singled out Allstate as an example of insurance companies who failed to provide sufficient premium relief,” the suit points out. 

The complaint stresses that although many businesses in the U.S. suffered amid the pandemic, the auto insurance industry is not among them, and in fact “secured a windfall” by continuing to charge premiums while much of the country was ordered to stay at home. With fewer cars on the road, at least in the early days of the pandemic, there were dramatically fewer accidents—and therefore fewer auto insurance claims, the suit relays. 

For instance, in California, from mid-March through April 2020, the number of miles driven by residents dropped significantly, a trend that the case argues continued through the end of 2020 and “well into” 2021. 

“This dramatic decrease in driving and auto accidents allowed auto insurance companies, including Allstate, to unfairly profit at the expense of their customers during the COVID-19 pandemic,” the complaint reads. 

Allstate is aware of the need to refund premiums in order to correct the “unfair windfall” it gained from policyholders amid the COVID-19 crisis, and is likewise aware of its excessive profits, yet has failed to adequately refund this money to customers, the lawsuit alleges. 

With regard to the defendant’s “Shelter-In-Place Payback” initiative, the complaint argues that the premium credit offered by the company to customers was far short of the 30 percent average refund benchmark that’s been conservatively estimated as an adequate refund for just the first two months of the pandemic alone. After it provided a 15 percent premium refund in March, April and May 2020, Allstate reported that it had provided refunds in the rest of 2020 and into 2021 ranging between seven and 3.5 percent of customers’ monthly premiums, the lawsuit says. 

The suit looks to cover all California residents who bought personal automobile insurance from Allstate covering any portion of the time period from March 1, 2020 to the present. 

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