Allstate’s Insurance Pricing Algorithm Based on Non-Risk Factors

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Allstate’s Insurance Pricing Algorithm Based on Non-Risk Factors
Short Title Allstate’s Car Insurance Charged Charging the Big Spenders Even Higher Rates
Location United States
Date 2013

Solove Harm Aggregation, Exclusion
Information Transactional, Identifying
Threat Actors The Allstate Corporation

Affected Middle-aged customers of Allstate in at least 10 States, who were paying highest premiums
High Risk Groups
Tangible Harms Financial Cost

The analysis of Allstate's pricing algorithm revealed that it has built a “suckers list” that would charge the big spenders even higher rates, meaning that one of the most significant factors correlated with policyholders’ proposed price shift was non-risk factor, but analysis of their transactional information.


In 2013 state regulators and consumer advocacy groups have analyzed Allstate Car Insurance Corporation’s use of personal data in the context of personalized pricing to find out how it calculated how much the company charges its customers. The analysis has revealed, that in the algorithm built by Allstate, one of the most significant factors correlated with policyholders’ ultimate proposed price shift was how much they were already paying. The customers who were paying the highest premium price ended up with their price shifting even higher (up to 20% in comparison to other customers' prices shifting only 5%). The main concern that the analysis specifies is that the rating of the customers was based not on risk factors, but on the prediction of clients money spending behavior. One of the privacy violations here is Aggregation, since the company combined financial data from multiple individuals which helped rating customers according to their transactional behavior. This can be also interpreted as Exclusion, because the individuals were unaware that their financial data were used to rate them and to raise the prices for big spenders even higher. This model was introduced by Allstate in at least 10 states: Arizona, Arkansas, Illinois, Iowa, Michigan, Missouri, Nebraska, Oklahoma, Tennessee, and Wisconsin. However, in Maryland and Georgia, the plan was rejected by state insurance regulators for being discriminatory.

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