Issues of Interest
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Price optimization is an emerging practice in the insurance industry drawing the attention of state regulators, consumer advocates, insurance agents and consumers. Opponents claim that insurers are mining data on customers to set rates based on factors that are unrelated to risk of loss in order to charge each individual customer the highest price that the market will bear. Proponents believe the pricing model is a statistical technique, within actuarial and regulatory standards, which helps insurers determine competitive rate plans.
In July 2013, former Allstate employee agents received notification from the company that their Allstate Retiree Life Insurance Benefit would be discontinued effective December 31, 2015. Many active Exclusive Agents were affected by the decision as well as other employee retirees who left the company after 1989. The company initiative prompted at least two lawsuits, which have been combined. The case is currently making it’s way through the court system.
On August 1, 2001, thirty-two former employee agents (the “Romero Plaintiffs“) sued Allstate on behalf of about 6,200 current and former Allstate agents whose employment was terminated as a result of Allstate’s “Preparing for the Future” reorganization initiative, seeking to recover pension, medical and other benefits estimated in the hundreds of millions of dollars, as well as compensatory and punitive damages.
Employees or Independent Contractors?
Agents under contract with Allstate Insurance Company have been classified by the company as independent contractors. However, many agents contend they have been misclassified.
On November 15, 1988, Allstate submitted a request to the IRS for a ruling on the status of Exclusive Agents for Federal Tax Purposes in advance of introducing its new Neighborhood Exclusive Agent program in 1990.