How Allstate’s auto insurance algorithm squeezes big spenders

Not sure what the specifics of the accident were, but car seats are rarely damaged unless the accident is major, which may very easily total the car. If the car wasn't totaled, which certainly sounds like the case, then it seems unusual to have an accident serious enough to damage the seats. Unusual, but not impossible. Maybe that's the reason for the denial.

I personally had no issues when one of their insured drivers hit my car. I waited for the police report, which clearly stated the other driver was at fault, and I was promptly paid by them for the damage to my vehicle. I didn't have to file anything through my insurance and they were very easy going about the whole thing.

I like to think of this as "attention arbitrage".

Bank fees are a good example. To you and I, an extra $3 bank fee is annoying but not worth allocating enough of our attention to avoid it. We aren't in the business of spending our whole damn day minimizing random bank fees.

But bank administrators are in that business. They spend their whole day trying to figure out how to maximize thieir profit and when they roll out a fee they can apply to millions of customers. There are enough customers hit by this they could summon enough total attention to push back, but the attention is divided among all those people and easily conquered. Meanwhile, the bank's effort to apply that fee is concentrated among a small number of people whose very job it is to do stuff like this.

So banks and other businesses discover cases like this where the quantity of attention they are willing to devote to something is larger than what any individual customer is, and that's where they squeeze.

"Many regulators disallow X" is not meaningful evidence that X is evil or a scam.

>also offers a glimpse into a potential future where companies of all sorts, not just auto insurers

No, not companies of "all" sorts. Just insurance companies. Other companies are regulated by Congress as part of antitrust regulations which would prevent them from doing this kind of thing. Insurance companies, however, are not regulated by antitrust laws. Insurance is declared to be "not commerce" and therefore not answerable to antitrust laws. They are permitted to break any antitrust law they please. This is why medical insurance companies, for instance, hold national meetings every few years to decide what price they are willing to pay for medical goods and services. This is price-fixing, and it is illegal in absolutely any industry - except insurance. In insurance, they can do it publicly because there literally is no law against it. There's a law PROTECTING it. It was called the McCarran-Ferguson Act. The plan was to repeal it as part of the Affordable Care Act. It was the clause that enabled the ACA to survive the entire revision process... and was then promptly removed from the bill immediately before its passage. This is why the insurers have never really fought very hard against the ACA. If it ever gets repealed, the McCarran-Ferguson act, that is, insurance companies will fall under antitrust regulation and have to change almost every business practice they follow. They will have to compete against one another on price, compete against each other on what prices they pay, etc. It would destroy their profit margins and probably result in the majority of them going out of business quite quickly. Don't hold your breath. It's why the insurance industry spends so much on lobbying and every lobbyist for every single industry will fight its repeal. In other words, it will NEVER happen. The law has been in place since 1945.

Because someone ran an analysis that says you can make $X more by doing one thing that doesn't cost you anything. Many companies just look at the numbers and say "sounds good."

It helps that since they are insurers, they know how make this analysis with a large degree of confidence.