ORDERS:
CONSENT ORDER AND ORDER OF DISMISSAL
WHEREAS, on August 28, 2001, Philip S. Porter, Consumer Advocate
for the State of South Carolina (the Consumer Advocate) requested the South
Carolina Department of Insurance (the Department) to initiate a public
hearing on the filing of Allstate Insurance Company and Allstate Indemnity
Company (collectively "Allstate") requesting approval of an overall increase
of 8.5% and 12.0%, respectively, in homeowners insurance rates. Included
in the rate change request are the proposals to place all new business
in Allstate Indemnity Company and to subject all new applications to an
Insurance Financial Stability score (ISF);
WHEREAS, on September 5, 2001, the Department filed with the
Administrative Law Judge Division an Agency Transmittal Form requesting
a public hearing;
WHEREAS, the Administrative Law Judge Division assigned this
matter to Honorable Ralph King Anderson, III, under the Docket Nos. 01-ALJ-09-0395-CC
(Allstate Indemnity Company) and 01-ALJ-09-396-CC (Allstate Insurance Company);
WHEREAS, the Consumer Advocate requested additional information
from Allstate and he and his consulting actuary discussed with Allstate
various concerns with respect to the filing, including, but not limited
to, the introduction of Insurance Financial Stability score (IFS) -- a
credit scoring system utilized to determine consumers' eligibility for
insurance or the premiums to be charged to a consumer;
WHEREAS, Allstate proposes (a) to introduce IFS only in Allstate
Indemnity Company and (b) to place all new business in Allstate Indemnity
only;
WHEREAS, as a result of these discussions between Allstate and
the Consumer Advocate, the parties declare and agree as follows:
1. Income level is not used as a factor in Allstate IFS model. In addition,
Allstate's scoring model does not include the actual dollar amount of balance
or credit limits as variables. Instead, the ratio of these items is considered.
2. Allstate has not had an independent evaluation of its IFS scoring
method. Allstate asserts that its scoring algorithm is a trade secret and
its underlying data and analysis is privileged and confidential and that
it would not reveal it unless ordered to do so by a court.
3. Allstate asserts that it does not obtain or retain information related
to ethnic origin and income for its policy holders.
4. Allstate shall keep the rating and underwriting experience (i.e.,
premiums, losses and policy counts/exposures) in the Allstate Indemnity
Company by IFS group and by zip code.
5. After Allstate obtains one year of data as described in item 4 above,
it shall perform two separate studies. The first study will rank zip codes
by median income based on the most recent available census data. Zip codes
would then be combined into five or more groups of equal population based
upon the rank of each zip code. The final number of groups shall be determined
once the original data is assembled in order to arrive at a statistically
meaningful zip code groupings. Allstate will then compare average IFS scores
and distributions of IFS groups for each of the five or more groups. A
second study will be done by ranking zip codes based upon percentage of
the minority population.
6. Allstate agrees to make the results of the studies described in item
5 above available to the Consumer Advocate and the Department. A description
of the data and analysis will be provided, the zip codes included in each
zip code grouping will be identified, and the experience totals for each
zip code group will be provided. Allstate asserts that the data by individual
zip code is proprietary and confidential, and would not be revealed absent
a court order, but nevertheless agrees that it will provide example zip
codes from some groups, identify the group they are from, and then provide
the experience numbers for those zip codes without identifying specifically
which zip codes they are. This information will be provided in good faith
in order to assist the other parties in understanding the impact of IFS
scoring on low income and minority population.
7. Allstate scoring model excludes medical liens that can be identified
on a credit report. However, Allstate recognizes that there is a potential
for other adverse items to appear on a credit record as a result of a serious
illness or a disability without being specifically attributed to such illness
or disability. Allstate currently does not have in place an appeal process
but recognizes the need to study this issue. Allstate agrees to investigate
in good faith what would be required to develop an appeal process to ameliorate
the adverse consequences of a serious illness or disability on insurance
underwriting and pricing. Within a reasonable time, Allstate will share
the results of such investigation with the Consumer Advocate and the Department.
8. Allstate made the business decision to use IFS scoring algorithm
for initial placement only and to not re-run credit reports at renewals
or as requested. Allstate agrees to continue to study how IFS scores and
loss ratios change over time before making further determination on this
question. Within a reasonable time, Allstate will share the results of
such investigation with the Consumer Advocate and the Department.
9. The fact that Allstate maintains here that certain information is
confidential and proprietary or constitutes a trade secret does not necessarily
mean that the Consumer Advocate and the Department concede that this information
is in fact confidential or proprietary or constitutes a trade secret.
10. Nothing in this order should be understood as an endorsement by
the Consumer Advocate or the Department of the credit scoring program as
a whole or any part thereof.
11. Based on the above agreements and declarations, the Consumer Advocate
no longer believes that the filing will result in rates that are excessive,
inadequate or unfairly discriminatory in violation of S.C. Code Ann. §
38-73-430 (Supp. 2000), and now withdraws his original request for a hearing
in this matter.
11. There are no unresolved issues remaining; therefore, all parties
agree to the dismissal of this matter.
NOW, THEREFORE, the above referenced matter is dismissed.
IT IS SO ORDERED.
______________________________
Ralph King Anderson, III
Administrative Law Judge
October 1, 2001
Columbia, South Carolina
WE CONSENT:
_____________________________ ______________________________
Kurt D. Cagle T. Douglas Concannon, Esquire
Associate State Filings Director Associate General Counsel
Allstate Insurance Company South Carolina Department
2775 Sanders Road, Suite A5 of Insurance
Northbrook, IL 60062 P.O. Box 100105
Columbia, SC 29202-6160
_____________________________
Hana Pokorna-Williamson, Esquire
Staff Attorney
South Carolina Department of
Consumer Affairs
3600 Forest Drive, 3rd Floor
Columbia, SC 29204 |
