If you’re late paying those higher auto premiums, Allstate now will ding you – Finance News

on Sep23

22 September 2017 | 8:00 am

For the first time, Allstate will impose a fee on policyholders who pay their premiums late.

The Northbrook-based insurance giant next month will start charging $10 when customers fail to pay their premiums on time, according to agents. The company has told agents that the new late payment is meant to compensate for the costs of sending cancellation notices to late payers.

The change comes after three years of persistent rate hikes for auto-insurance customers, not only from Allstate but many other insurers as well. In Illinois, Allstate increased car insurance rates by about 19 percent on average between 2014 and 2016, according to filings with the Illinois Department of Insurance.

Fees for late payments are a rarity in the insurance business. An official with the National Association of Insurance Commissioners knew of no major insurers that do it.

State Farm Insurance, by far the largest insurer of homes and vehicles in the country, doesn’t charge late fees, a spokeswoman said.

Allstate’s move risks angering customers who’ve experienced more aggressive price increases from the good hands people than those of many competing insurers. Nationally, for example, Allstate raised auto rates 15 percent on average between 2014 and 2016 while archrival State Farm upped them 12.8 percent.

Typically, insurers give notice to customers who are late paying their premiums. The notices provide a period of time—10 days is common—for the tardy to pay up before their policy lapses and must be reinstated.

Essentially, the penalty for failing to pay is losing coverage. It’s not the same as services such as cable television or utilities, where the customer is getting the product while failing to pay.

An Allstate spokesman didn’t respond to a request for comment.

Agents said the company told them it spends more than $15 per late-paying customer in notices and reinstatements. This payment will just recover some of that money. (First offenders will get a warning and then will see the fee if it happens again, the agents said.)

Presumably, that will be the justification Allstate provides to insurance regulators in states requiring approval of any new fees or rate hikes. A spokeswoman for the California Department of Insurance—one of those states—said Allstate hadn’t yet notified the department of the new fee.

Illinois is one of the few states that permits insurers to change rates with no oversight other than notification.



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