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Showing loyalty to your insurance company won’t always result in a cheaper policy, according to the Consumer Federation of America.

The group Tuesday called out Northbrook-based Allstate for using measures unrelated to risk to determine premiums, the monthly cost of insurance. The federation said Allstate uses factors related to consumers’ likelihood of “paying higher than appropriate premiums.” Basically, if a consumer is likely to stay with a particular company, insurers are more likely to increase rates.

And, the group said, companies do it without clearly disclosing the process to state regulators. Rules in every state require that premiums are based on a policyholder’s level of risk, according to the consumer advocacy group.

“Allstate’s insurance pricing has become untethered from the rules of risk-based premiums and from the rule of law,” said J. Robert Hunter, CFA’s director of insurance and the former Texas Insurance Commissioner. “Unfortunately, we believe that Allstate is not alone in using this new and patently unfair approach to auto insurance pricing, they are just the first to be unmasked.”

Allstate did not immediately respond to a request for comment.

This practice of essentially penalizing loyal customers is called “price optimization,” a strategy made possible by sifting and analyzing customer data.

A free market generally allows for raising prices, but auto insurance is different because states require drivers to buy it. Consumer groups say low-income customers, who tend to have fewer market options, tend to shop around less than relatively wealthy consumers.

“This is a watershed moment in the history of insurance consumer protection,” Hunter said. “If regulators don’t block this scheme immediately, American consumers will pay a huge price. While we are forced by law to buy these companies’ insurance products in order to drive, there seems to be nothing stopping them from targeting millions of unsuspecting customers with unnecessary and unjustified price hikes.”

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