The consumer group Texas Watch has been keeping an eye on recent insurance hearings, and has written about it:

So, just what is a junk insurance policy? Sen. Leticia Van de Putte said she’s been hearing from constituents who are fed up with junk policies with what she called “luscious exclusions” and “skyrocketing” deductibles. She asked Insurance Commissioner Eleanor Kitzman about this at a recent committee hearing. Kitzman was unaware of the problem.

Well, we are aware of the problem. So, we sent Sen. Van de Putte a letter outlining the problem (and we sent a copy to Commissioner Kitzman too).

Five months on the job as Texas’ top insurance regulator, Houston native and former insurance executive Eleanor Kitzman is under close scrutiny by consumer groups, lawmakers and insurers as she deals with the first major rate filings of her tenure.

As head of the agency that regulates the state’s multibillion-dollar insurance industry, Kitzman will make decisions that directly affect the pocketbooks of most Texans — those who buy auto, home, health or other types of insurance — as well as the business fortunes of hundreds of insurers.

Her lengthy background in the industry — including the auto insurance business she started in South Carolina — gives her a leg up in overseeing the market, but also makes some consumer groups skeptical about whether she will hold companies accountable for anti-consumer practices.

“I have a different agenda than I did when I was running my insurance business or working as an attorney for insurance companies,” Kitzman said in a recent interview. “I know how the business works, so I know what insurance companies can do.”

Kitzman insisted her background and knowledge of insurance put her in position to “better serve consumers in every way.” But, she added, “having a robust, competitive market is very good for consumers.” She added: “I can also recognize gratuitous whining [by insurers] when I see it.” But consumer advocates fear she’s already shown her tendency to favor insurers.

In her first major decision last fall, Kitzman approved a rate plan by the state’s largest insurer, State Farm, that will begin switching many of the company’s homeowner policies to a higher deductible. Policyholders will have to shoulder a greater share of their property losses — while paying slightly higher rates. The overall rate increase was only 2 percent in North Texas, but Kitzman acknowledged to a Senate committee that State Farm customers will be getting less coverage for their money because of the new deductible.

A leading consumer group, Texas Watch, accused her of giving in to the “biggest bully” in the Texas insurance market. “This was Commissioner Kitzman’s first big test, and she failed miserably,” said the group’s Alex Winslow. “Insurance companies and their lobbyists are crowing over the decision.”

A new study produced by consumer and public-interest groups claims insurance companies create periodic crises to drive up profits.

The Americans for Insurance Reform study says these crises, where coverage becomes unaffordable or unavailable, are known as “hard markets,” sending premiums sky-high. Authors of the study further claim the insurance industry uses these supposedly manufactured crises to support their calls for “tort reform” – asking legislators for new laws making it more difficult to sue.

Sound familiar? North Carolina’s General Assembly passed legislation this year restricting the ability of people who claim they have been injured to seek compensation through the courts.

The report, titled “Repeat Offenders: How the Insurance Industry Manufactures Crises and Harms America,” also concludes the country has been in a soft market since 2006, with rates stable and dropping in every state. Now, according to the report, some in the insurance industry are using Hurricane Irene to justify jacking up rates, even though the storm wasn’t as bad as predicted.

From the American Association for Justice press release.

Every time you pull out of your driveway, it’s a roll of the dice. You could be the most careful and reasonable driver in Texas and still find yourself calling a body shop or, worse, in physical pain because some less careful, less reasonable goof ran into you.

You take this chance because you have places to go, people to see. Almost always, fortune smiles and you arrive safe and sound.

When you don’t, you begin a new gamble. Does the other driver have insurance? The state requires it, but as you’ve read here and elsewhere, it’s about 1-in-4 that the other guy doesn’t. Even if he does — or appears to be covered — your long road has only begun.

If you’re lucky and not at fault for the wreck, the other guy calls his insurance company, which deals with you in good faith. You are made whole for damages to your car and person.

If you’re not lucky, that insurance company stalls. Or tries to low-ball your claim. Or disputes all evidence, including your witnesses, and refuses to pay, perhaps hoping you’ll take less or maybe even go away.

This may not be the rule in Texas, but it happens more than anyone should tolerate. A recent Dallas Morning News report highlighted the cases of a Mesquite woman denied her claim because the other driver was on his mother’s policy and a Rockwall man shorted $1,000 on a promised rental-car reimbursement.

Consumers filed more than 6,600 complaints last year against auto insurers in Texas, more than half by drivers who contended they were not at fault in an accident but had trouble getting an insurer to pay. Another 4,200 claims were filed in the first three quarters of this year, according to Texas Department of Insurance statistics.

Two companies, Fred Loya Insurance Co. and Old American County Mutual Insurance, have complaint rates far higher than the state average and are under department investigation. Potential penalties range from fines to the so-called death penalty — revoking a company’s license to write policies in Texas.

What can the rest of us do? Add this to your post-accident to-do list: File a complaint with the state insurance department. It may seem like one more waste of time, but your voice has value. Don’t let anyone tell you that you have no recourse, because you do.

The state needs your data on slow-paying or no-paying insurers, who build such cheating into their business model to undercut better insurers on cost. Reputable companies — they do exist — have little fear of state investigation because they tend to operate in good faith and pay what they owe.

The state needs your complaints on the other guys to build a pattern of unethical business practices against them that could chase them out of Texas for good. More complaints, clearer pattern. The sooner that happens, the better for everyone.

Now the Dallas Morning News has exposed some of these tactics in an excellent article that identifies the suspect insurance companies by name. I encourage anyone who owns a vehicle to read this article. You do not want insurance with one of these companies. A denial of coverage means that you will be personally responsible for any damages you cause in a car wreck, while your insurance company will keep your premiums and say “tough luck” to you.

Some of these shady tactics include issuing an auto insurance policy in the name of a person who is not the owner of the car, with the owner listed as an “excluded driver.” So the vehicle does have insurance coverage (which satisfies the police and keeps the vehicle from being impounded in case of a collision), but the owner of the vehicle is actually uninsured. The result is that if the owner of the car causes a collision, the innocent person he hits is out of luck. Another tactic is to claim the insured person is “refusing to cooperate” with the insurance company’s investigation of the collision. This is actually a legitimate reason for denying a claim. But what the sleazy insurance companies do is just never try to contact their insured, and flat out lie when they say their insured is not cooperating. We have seen each of these situations multiple times.

Please read the newspaper article. Here are excerpts:

Pat Taylor of Mesquite was headed home after a typical workday this summer when another car jolted her Toyota Highlander from behind. The damage to her SUV was serious and, she said, the 20-year-old driving the other car clearly was at fault. Police arrived and the other driver showed an insurance card from a company that Taylor figured would cover her losses, estimated at $1,500.

But after several days, she said, the other driver’s insurer — Fred Loya Insurance Co. — told her that the policy was in his mother’s name and that he was excluded from coverage, and that the company would not pay for the damages.

“It was infuriating,” she said of the accident along U.S. Highway 80. The insurance card from Loya “let him get his annual inspections and license renewals. But when he got into an accident, all of a sudden he had no insurance coverage.”

Taylor’s case is not an isolated example for drivers in North Texas and across the state after accidents involving Loya or Old American County Mutual Insurance — two major companies at the top of the state’s complaint list for auto insurers.

The Texas Department of Insurance says Loya, which collected $271 million in premiums last year, had a “complaint index” of 2.4, nearly 21/2times the state average. The larger Old American, which had premiums of $575 million, had a complaint index of 3.96 — nearly four times the state average.

House Insurance Committee Chairman John Smithee, R-Amarillo, said he has had growing concerns about certain insurers who regularly refuse to pay claims in which their policyholders are at fault.

Typically, Smithee said, an adjuster for the company tells the injured party that if the claim isn’t paid, the person will have to hire a lawyer and will probably wind up with little money for the trouble. At that point, the driver feels forced to take 50 percent or less of the claim for damages. “It has been hard to make some of these companies behave,” he said.

Last year, consumers filed more than 6,600 complaints against auto insurers in Texas. More than half were filed by drivers who said they were not at fault in an accident but had trouble getting an insurer to pay their claims.

Alex Winslow of Texas Watch, a consumer group active in insurance issues, said unethical companies have an advantage because they undercut regular insurers on price largely because of the claims payment practices.

“The business model is they drag their feet and make it as difficult as possible for the claimant to collect in hopes they will take a low-ball offer or give up,” he said.

“I’m concerned the Insurance Department is not being aggressive in policing market conduct. They should be exercising more authority over these companies that are using questionable practices.”

AT A GLANCE: Complaints filed with state

HIGHER THAN AVERAGE

These Texas insurers had an above-average number of complaints in 2010, based on Insurance Department complaint index*:

AAA Texas County Mutual 2.06

ACCC Insurance 1.28

Allstate Fire and Casualty 1.16

Allstate Indemnity 1.29

Colonial County Mutual 1.64

Geico Indemnity 1.36

Home State County Mutual 1.58

Liberty County Mutual 1.33

Fred Loya Insurance 2.4

Old American County Mutual 3.96

Southern County Mutual 1.95

*The average index for all companies is 1.0; a higher number would indicate the insurer has more complaints than average filed with the state. A company with an index of 3.0 has three times as many complaints as the typical company. Eleven of 25 insurers with more than 100,000 policies in Texas had an above-average complaint index.

SOURCE: Texas Department of Insurance

State Farm Insurance is charging some of the highest premiums for homeowner coverage in North Texas despite the company’s repeated claims — in court and the public arena — that its rates are fair and competitive with other major insurers.

New rate figures compiled by the Texas Department of Insurance show that State Farm, the largest property insurer in the state, is charging premiums well above average rates for the 27 largest companies doing business in the Dallas area.

Premiums charged by State Farm are significant because the company has been locked in a legal battle for nearly eight years with state regulators, who contend the insurer owes its customers at least $350 million for overcharges dating to 2003. The state’s consumer advocate for insurance once estimated the overcharges at close to $1 billion.

For example, State Farm said its annual premium is $1,679 on a 10-year-old brick home in North Dallas insured for $150,000. That was well above the average $1,298 premium. Just three small companies had higher premiums than State Farm, and one — Metropolitan Lloyds — was almost the same.

Figures were similar in other Dallas-area ZIP codes studied by The Dallas Morning News . In Austin, Houston and San Antonio, State Farm premiums were also among the highest listed of the two dozen or so companies selling homeowners policies in each area.

Consumer representatives said they have noticed that State Farm is charging higher rates than most insurers.

“I am not surprised at all,” Texas Public Insurance Counsel Deeia Beck said of the company’s rates. She noted that when several insurers were asked to lower their rates after a massive insurance reform law was passed by the Legislature several years ago, only State Farm said no.

“It has had a cumulative effect. State Farm was the only company that refused to lower its rates, so their base has been higher for several years,” she said.

Alex Winslow of Texas Watch, a consumer group active in insurance issues, said State Farm continues to be “the bully on the block” in property insurance and can often dictate the terms of the market because of its size. State Farm Lloyds, the company’s home insurance subsidiary, holds nearly 29 percent of the market.

“The Texas Department of Insurance has basically been letting them charge whatever they want. State Farm is calling the shots,” said Winslow, pointing to twin rate increases by the insurer in late 2009 and early 2010 that together boosted rates as much as 35 percent for many customers in Dallas County and surrounding areas.

Former state Insurance Commissioner Mike Geeslin asked State Farm to reconsider the rate hikes and even went so far as to set up a special place on the Insurance Department’s website so that State Farm policyholders could see how much more they were going to have to pay in premiums.

But State Farm ignored Geeslin, an appointee of Gov. Rick Perry, and he eventually gave up.

Under the state’s file-and-use system for insurance rates, companies can increase premiums once they have notified the Insurance Department. The commissioner can review the rates and reject those considered excessive or unjustified, but a company can challenge the decision in court and keep charging the higher rates.

“Until we have a process that allows the commissioner to intervene more forcefully on behalf of consumers, large insurers like State Farm are going to continue to control the market,” Winslow said.

An analysis of rates charged by 27 insurers in several ZIP Codes in the Dallas area shows that overall home insurance prices have not changed significantly from a year ago, probably reflecting the fact that insurers had a very profitable year in Texas in 2010.

SHOPPING FOR INSURANCE

GETTING THE BEST DEAL

Some tips for how to get the best deal on homeowners insurance:

Decide what you need: Examine coverages and coverage amounts.

Shop around: Rates vary widely among companies. Ask several for different rates, but make sure you’re asking about the same coverage.

Deductible: Choose the highest deductible you can afford, because you’ll lower your premium.

Discounts: Ask an agent which ones you might qualify for.

Beyond price: Look at other factors, including a company’s financial rating, record of dealing with consumer complaints and the status of licensing by the state.

FACTORS IN SETTING PREMIUMS

Age, location and condition of the house: The older or worse condition, the higher the cost. Weather and crime history in your area also will have an effect.

Construction materials: Insurance for brick homes is cheaper than for frame homes.

Fire protection: The better the fire services in your area, the better the rate.

Claims history: The more you’ve filed, the higher your premium.

Credit score: Companies are allowed to use it but can’t refuse you business based solely on your credit history.

MORE INFORMATION: Compare rates at www.helpinsure.com, a state-run site, or call the Texas Department of Insurance’s consumer help line at 1-800-252-3439.

RICK PERRY AND INSURANCE

Gov. Rick Perry made property insurance a key campaign issue in his first race for governor in 2002, taking on Farmers Insurance and other companies for sharply increasing rates after a surge in mold and water damage claims that year. But he has not talked much about insurance in recent years, even though Texans pay the highest homeowners premiums in the nation. The governor’s main impact on insurance is his appointment of the state insurance commissioner and his office’s input on insurance bills passed by the Legislature. In most cases, those bills must be signed by the governor to become law. He has consistently opposed a prior review system under which the state would evaluate rates before insurers can implement them.

The Washington Post reported that the new rules change “the standards in ways that disappointed leading advocates for health-care consumers.” The regulations “are intended to guarantee patients nationwide the same rights to appeal if their insurers do not cover care that they consider necessary. The federal standards…replace a patchwork of separate state policies.” HHS “officials issued the rules 11 months ago, but they have been working to fine-tune them amid a blizzard of lobbying. Insurers and employers have been urging limited rights to appeal, while consumer groups have been arguing for stronger patient protections.”

The Wall Street Journal said that the Administration is delaying the effective date of these rules until January 1 of 2012. They were supposed to take effect in July.

CQ reported that the regulations give “states until January 1, 2012 to adjust their insurance regulations to comply with a health law requirement that health plans establish a process for enrollees to appeal claim denials within the company and to take their complaints to an external review board if need be.”

From the American Association for Justice news release.

Our firm has seen this tactic used by USAA and by other insurance companies to dispute perfectly reasonable medical and hospital bills, forcing our clients to file suit in order to receive fair compensation. USAA uses this tactic against their own policyholders who have Personal Injury Protection coverage. Here are excerpts from the newspaper article:

USAA again is defending itself against charges it utilizes a “cost containment program” to improperly reduce or deny medical payouts to insurance customers injured in auto accidents.

The latest claims against the San Antonio financial and insurance company were made in a federal lawsuit filed this week in Oregon.

The lawsuit, which seeks national class-action certification, charges that USAA uses an outside auditor to assess claims and to “uniformly conclude that medical treatment was not needed.”

USAA denies the allegations.

USAA previously settled two class-action lawsuits that accused it of using flawed data to arbitrarily deny a portion of the medical benefits for injured customers who have personal-injury protection (PIP) or other medical-payments coverage on their USAA auto-insurance policies.

One of those cases, filed in Arizona, was settled last summer. Claims are still being processed, so the amount to be paid out under the settlement hasn’t been determined.

The other case, filed in Illinois was settled in 2005. Lawyers for the plaintiffs valued the settlement on their website at $35 million, a figure USAA spokesman Paul Berry called “probably wildly” inflated.

USAA settled the two cases because it was the “right thing to do for our membership,” Berry said. He noted both courts endorsed USAA’s bill-review practices.

“We pay all reasonable, necessary and accident-related bills,” Berry said. “That doesn’t mean we pay all bills. If you had injuries or you received some treatment that had nothing to do with (an auto) accident, we’re not going to pay those bills.”

USAA relies on Alabama-based Auto Injury Solutions to help review medical bills to determine whether they are reasonable and necessary and to weed out duplicative and fraudulent claims. Bills deemed suspicious are reviewed by a doctor or other health-care professional, Berry said. Even when one of its doctors concludes the medical care wasn’t necessary, the bill still goes through several other reviews, he said.

In the latest Oregon lawsuit, four unrelated USAA customers in separate accidents allege the medical reviews were a “sham.”

Currently, the minimum level of liability insurance required is $50,000 for causing injury or death of one person, $100,000 for injury or death of two people, and $15,000 for property damage. The proposal would drop the levels to $25,000, $50,000 and $10,000.

The Republican bill is in response to a 2009 law passed by the legislature (then dominated by Democrats) that raised the minimum limits on auto insurance.