INSURANCE INDUSTRY

Geico to face suit on alleged overcharging

The auto insurer Geico, a unit of Warren Buffett’s Berkshire Hathaway, must face a proposed class action claiming it overcharged policyholders as the coronavirus pandemic led to less driving and fewer accidents, a judge has ruled.

In a decision Thursday, U.S. District Judge Sharon Johnson Coleman in Chicago said Illinois drivers may try to prove that Geico violated a state consumer fraud law by unfairly and deceptively marketing its “Geico Giveback” discount program. She dismissed breach-of-contract and unjust-enrichment claims.

Neither Geico nor its lawyers immediately responded to requests for comment Friday. Lawyers for the plaintiffs did not immediately respond to similar requests.

Geico last April offered policyholders $2.5 billion in credits, including 15 percent on renewals from April to October, averaging about $150 per policy.

But policyholders led by Briana Siegal said this induced them to renew and pay excessive premiums rather than shop around, as stay-at-home orders and closures resulted in less time on the road.

Siegal also said Geico’s credits compared unfavorably with refunds offered by other insurers.

She cited a report by the Consumer Federation of America and the Center for Economic Justice awarding Geico’s program a “D-minus,” below the “A” and “B” grades given to State Farm and Allstate, which offered refunds.

Without ruling on the merits, Coleman said the plaintiffs adequately alleged that Geico misled them into thinking it was passing on all its savings from reduced driving and did not disclose that its premiums were “not based on an accurate assessment of risk during COVID-19.”

— Reuters

FINANCIAL SERVICES

Wall Street giant seeks more Black recruits

Morgan Stanley is expanding a program to recruit Black professionals into its markets business regardless of their experience in financial services, bank executives said.

Last fall, the Wall Street giant launched the Morgan Stanley Experienced Professionals Program, which invites Black professionals from any field to apply, in a bid to improve diversity within the business after nationwide protests against racial inequality last summer.

The initiative was meant to cast a wider net to reach qualified candidates typically missed by the traditional Morgan Stanley recruitment process, said Derek Melvin, a managing director in the fixed-income division who designed the program.

Since launching the program in its fixed-income and business resource management divisions, the bank has added a second cohort to its equity research division and is recruiting for a third group within its equity sales and trading department.

“We’re looking for candidates that demonstrate success in their previous careers and a willingness to adapt and understand the transferrable skills that would be relevant and beneficial in our world,” said Sam Lalanne, head of diversity and inclusion for Morgan Stanley’s institutional securities group.

The first cohort started rigorous training last month and includes former lawyers, educators and government officials. One new hire spent his career as an aviation mechanic with Delta Air Lines, another was an intelligence officer, and another was a media producer.

Fewer than a third of the group’s members had backgrounds in financial services.

— Reuters

Also in Business

Volkswagen wants electric vehicles to make up the majority of European sales for its core brand by 2030, it said Friday, becoming the latest carmaker to announce an accelerated shift toward battery-powered models. Fully electric vehicles are expected to account for more than 70 percent of its total European vehicle sales by 2030, compared with a previous target of 35 percent, the world's second-largest carmaker said.

HBC, the owner of Saks Fifth Avenue, said Friday that it would launch the luxury department store's e-commerce segment as a separate business after a $500 million infusion from U.S. private-equity firm Insight Partners. Homebound shoppers have lifted demand for expensive makeup and handbags online during the pandemic, prompting luxury-goods sellers to double down on their e-commerce business.

— From news services