Texas will have to consider less regulation of insurance companies and their rates if the Department of Insurance sees its funding cut 10 percent to help balance the next state budget, Insurance Commissioner Mike Geeslin said in documents filed this week with the governor and legislative leaders.

Consumer groups and other critics are calling on the Legislature to ramp up regulation of the insurance industry next year. But the commissioner warned that deep funding cuts could force the state to switch to a new regulatory system, such as one that is more concerned with giving consumers information about insurance products than keeping tabs on rates.

“If reductions of $29 million (10 percent of the agency’s budget) were implemented, TDI cannot predict the effectiveness of the current regulatory structure in Texas,” Geeslin said in a summary of his legislative appropriations request for the next two-year budget.

“If you want to cut weight from a car, and you remove two of the tires and half the transmission, it ceases to work like a car. The same could be said” for the department, Geeslin said. “It could be scaled down to a certain level, but at some point it ceases to work efficiently.”

Geeslin suggested two possibilities, including one in which the agency would be focused on giving information to consumers to help them buy insurance policies. The other would have the agency monitor the business plans of companies to make sure they are following them. The agency would be less concerned with “legal infractions” and individual actions of insurers under both options.

Regarding a potential 10 percent reduction, the commissioner said the impact “would critically impair [the department's] ability to effectively regulate the insurance industry and workers’ compensation system under current Texas law.”

Alex Winslow of Texas Watch, a consumer group active in insurance issues, said that the suggestion to weaken oversight of companies as a way to pay for budget cuts “takes Texas in the wrong direction.”

“We need stronger oversight to ensure rates are fair and claims get paid in full and on time – not weaker standards that allow insurance companies to abuse Texas homeowners even more than they already are,” he said.

In Texas, carriers can raise their rates by any amount (up to 50%), at any time, without having to get permission from the state. Not surprisingly, this system has led to large, frequent rate increases by some insurance companies. We can hope for change. Here are excerpts from the article:

The Texas Department of Insurance is about to change its longtime policy of allowing uncontested insurance rate increases of up to 50 percent without interference, officials said.

State regulators will require insurance companies to justify “unreasonable” premium rate increases under the new federal health care overhaul, the Austin American-Statesman reported. State officials say they have always had that authority but have used it sparingly, the newspaper reported.

“In the past, we’ve looked at rate increases above 50 percent, and we’ve looked at complaints. That’s mainly what we’ve done as a watchdog,” said Katrina Daniel, senior associate commissioner of the department’s life, health and licensing program.

She said Texas lacks the resources, including staff and data, to perform regular rate reviews and comparisons.

However, under the new federal law, insurance companies will be required to justify to federal and state regulators “unreasonable” rate increases before imposing them. Companies also will have to post that information on their websites.

The federal government has yet to define what it regards as “unreasonable,” Daniel said.

Last week, federal officials distributed $46 million of $250 million in grants to the states. The $1 million Texas received was expected to go toward developing data required for more rate reviews.

“We will be reviewing more rates, for sure,” Daniel said.

Insurance companies have argued that rising health care costs have forced their rates to increase.

The State Farm increase is relatively small at an average of two percent. But multiply that by the 3,000,000 drivers insured by State Farm, and you have a nice bump in the bottom line. State Farm County Mutual, a subsidiary company mainly for higher-risk drivers, will increase rates an average 6.8 percent. The increases will be effective on August 16.

The Texas Public Insurance Counsel did file objections to the rate hike, saying they would produce rates that are “excessive, unreasonable and unfairly discriminatory.”

Of course we always advise our clients, and anyone else who will listen to us, to buy uninsured motorist coverage insurance. It doesn’t add all that much to the cost of your basic policy, and can make a huge difference if you’re in a collision with a driver who has no insurance.

Sadly, many people don’t take our advice. It’s disheartening to us to have potential clients come in to the office after collisions that was not their fault, only to discover the other drivers have no insurance and our clients have only liability coverage. There’s almost never anything we can do to help a potential client in that situation.

]]> http://www.pissd.com/2010/07/25-of-vehicles-uninsured-in-dallas-county/feed/ 0 http://www.pissd.com/2010/06/featured-link-know-your-stuff/ http://www.pissd.com/2010/06/featured-link-know-your-stuff/#comments Fri, 25 Jun 2010 21:32:20 +0000 Bob Kraft http://www.pissd.com/?p=5457 The Insurance Information Institute has set up a helpful Web site called Know Your Stuff. It provides an easy way to enter information about items in your home so in case of a loss you’ll be able to prove to your insurance company what you owned, and have some idea of what it cost. The site is free for personal use, and there’s a nominal charge for business use. Check it out. Here’s the description:

Welcome to Know Your Stuff® – Home Inventory, the Insurance Information Institute’s free online home inventory software. This application makes creating and updating your home inventory easy and efficient. And with our free, secure online storage you will have access to your inventory anywhere, any time. You never know when a disaster may strike, but you can be prepared with an up-to-date home inventory.

All insurance companies are in business to make money. The way they make money, other than investments, is to take in premiums and to pay out as little as possible when claims are made against their policyholders. Or when claims are made by their policyholders for collision or comprehensive damage. The basic problem reported by the newspaper is that certain insurance companies are much bolder than others in finding creative ways to refuse to accept liability and pay out money.

Most insurance carriers will decline to pay if their own insured refuses to cooperate with them. They say they can’t get an accurate version of the accident, and therefore should not have to pay. Some carriers though seem to make this argument in a very large percentage of their claims. This makes you wonder if the carrier has really tried to get the insured to cooperate. Perhaps they sent one letter or made one phone call, and receiving no response, denied liability coverage. Or maybe they never even sent that letter.

Another tactic we frequently see from certain companies is to claim the vehicle was stolen or used without the permission of the owner, and therefore the carrier denies coverage. These companies also almost always claim that the plaintiff was partially at fault in some way, and contributed to the collision. Then they offer to pay only half or perhaps 60% of the total damages.

I hope you never have the misfortune of being involved in an auto collision. But if you are, I especially hope you don’t get insult added to injury (literally) by having to deal with one of the bottom-feeding insurance companies like Loya or Old American County Mutual. And while they may be the worst, as measured by consumer complaints, there are plenty of others only marginally better. If you start getting the runaround early in the process, your best bet is to hire a lawyer to fight for you. Otherwise these companies will just grind you down until you’re willing to accept almost any offer just to be rid of them.

Here are excerpts from the Dallas Morning News article:

Larry Randall was one of thousands of Texas drivers in accidents last year that weren’t their fault. But unlike many, the Richardson engineer’s problems were just beginning after the collision.

The driver who sideswiped his 2006 Chrysler Sebring and forced him off the road in May 2009 had a policy with an insurer that Randall later discovered was among the worst in handling claims.

That company, Loya Insurance, initially balked at assuming responsibility for its policyholder — who tried to flee the scene — and then said it would pay just $270 for damages and expenses that Randall estimated were nearly $1,700.

“They tried to ignore me from day one, and then they finally sent me a check covering a fraction of my claim. When’s the last time you heard of major damage to the side of a car being fixed for $300?” Randall said, noting he has not cashed the company’s check.

Loya is one of two large auto insurers that had a complaint record well above the state average in 2009, according to a new listing of “justified” complaints handled by the state Insurance Department.

Those complaints from Texas drivers included such practices as delays in processing claims, unsatisfactory offers or settlements, denial of claims and liability disputes.

An analysis of the Insurance Department figures by The Dallas Morning News showed that 10 of the 25 largest auto insurers in the state — those with more than 100,000 policies — had worse-than-average customer service records.

The two companies at the top of the list — Loya and Old American County Mutual — are now being investigated by the Insurance Department for violations of state regulations, an agency spokesman said.

Loya, which collected more than $283 million in premiums last year, performed nearly four times worse than a typical Texas insurer, according to the state-calculated “complaint index.”

Edgar Meza, vice president of claims for Loya, said many of the complaints stem from differences over the market value of cars that are totaled and from accidents involving a person driving a Loya-insured vehicle who has been excluded from coverage.

Meza also said Loya serves a unique customer base, typically lower-income drivers who have trouble obtaining insurance.

He also said complaints against the insurer are down significantly in 2010 — and that Loya takes those complaints seriously.

Old American County Mutual, a Dallas-based company that collected nearly $539 million in premiums, had a complaint index of 3.42 — or about three and a half times worse than a typical company. Old American declined to comment on the complaint numbers.

No other company besides Old American and Loya broke 2.0, which would be twice the average.

The two insurers have a business relationship, and Loya is listed as one of several managing general agents for Old American on its website.

Hospital administrator Peggy Bryant of Rockwall also had troubles with Loya after her Volkswagen was hit by a driver insured by the company.

“It was quite an ordeal,” she said.

“They low-balled the damage by over a thousand dollars, and then the games began. They told me they weren’t going to pay the difference even though their client took responsibility for the accident.”

Bryant, who had to sue to get her claim paid, said of her experience: “I hope to God I never get hit again by somebody with Loya insurance. If I do, I’ll probably hire a lawyer right away.”

HOW TO FILE AN INSURANCE COMPLAINT

• Consumers must file a complaint by phone (1-800-252-3439), e-mail (consumerprotection@tdi.state.tx.us) or the complaint form on the agency’s website (www.tdi.state.tx.us).

• After studying the complaint, the consumer protection division sends the insurer a copy and asks for a detailed written response to the complaint.

• The Insurance Department staff then determines if the claim or any other issue was handled properly under the policy.

• The staff also reviews the file to assess whether laws were violated.

• If violations are found, the department institutes an enforcement action that can result in sanctions ranging from a fine and restitution to revocation of the insurer’s state license.

At least six major insurers, including State Farm Insurance Cos., Allstate Corp. and Geico, have begun examining past claims involving the recalled vehicles, which number about 6 million in the U.S. and 8 million around the world. Insurers can request that Toyota pay them for the claim if a vehicle defect is proven to be a key factor in a crash, a long-standing industry practice known as subrogation. Many insurers have begun notifying Toyota Motor Corp. that they will do just that.

The move could repay some Toyota owners their out-of-pocket costs due to crashes but probably wouldn’t have much of an impact on the premiums drivers pay. And it would mostly involve crashes in which people weren’t seriously injured, because those cases frequently find their way into lawsuits.

Insurance companies typically refund deductibles — the amount a policyholder must pay before the insurance takes over — to their customers when they are repaid in such cases, officials of several companies said this week. None would release any financial estimates or the number of potential crashes, but given the sheer size of the Toyota recalls the liability could be in the millions of dollars.

Experts say most insurers have agreements with automakers to negotiate a confidential settlement over defect-related claims — and automakers such as Toyota usually have insurance to cover most of the costs.

“It will be a whole bunch of small claims. What you have here are the fender benders,” said Mark Bunim of the mediation firm Case Closure LLC in New York. “The major claims, where someone’s a paraplegic, they will not be part of that group.”

The National Highway Traffic Safety Administration has linked 52 deaths to claims of sudden acceleration in Toyotas, and more than 100 wrongful death and personal injury lawsuits have been filed against the automaker around the country. Those are being consolidated before a California federal judge for pretrial matters along with more than 130 lawsuits filed by Toyota owners claiming their cars have lost value since the recalls. An initial hearing is set for May 13.

Insurance Commissioner Mike Geeslin, who is powerless to stop the rate hike, asked State Farm in a letter to reconsider, saying such back-to-back increases could influence other insurers and rock consumers.

“Given that State Farm Lloyds is the market leader, writing nearly 30 percent of the homeowners market, other companies may follow suit, which would lead to further market instability,” Geeslin wrote in a letter dated March 5.

“The timing of this filing causes me concern,” he said, because the last increase has been in effect for such a short time. “Multiple rate increases within such a short period of time may indicate a lack of rate-making discipline and lead to market instability.”

State Farm is having discussions with the Texas Department of Insurance, but intends to continue with the increase to its 1.2 million customers, said spokesman Kevin Davis.

Consumer groups expressed anger over the jump, calling it price gouging and blaming Texas’ weak regulations for allowing State Farm and other insurers to raise their rates unabated.

Public Insurance Counsel Deeia Beck, a state attorney who represents insurance consumers, served notice that her office objects to the State Farm increase as excessive and unjustified, especially because it will be the insurer’s third spike in rates in the last two years.

She asked Geeslin in a letter Thursday to disapprove of the adjustment, saying State Farm is seeking “unreasonably excessive” profits and that its costs are largely because of reinsurance, which it usually buys through its own holding company.

Reinsurance is the practice of insurers buying coverage for catastrophic events to mitigate their losses. Those expenses should be disallowed as an unreasonable expense, Beck said.

Alex Winslow of the consumer advocate group Texas Watch said State Farm is taking full advantage of the weaknesses in the Texas insurance system.

“All the insurance commissioner can do is ask State Farm to please not gouge Texas homeowners,” Winslow said.

Under the Texas system enacted in 2003, insurance companies file notice of their rate increases and the justification behind the rates.

The state cannot block the new rates but can seek customer refunds if it subsequently finds that the rates are excessive and unreasonable.

The insurer and the state have been fighting in court over the refund for seven years. The state’s public insurance counsel had presented evidence showing that customers deserved $1 billion in refunds. State Farm has argued there was no overcharge at all.

Texas Watch has been advocating a change in state law that would require prior approval from the state before insurers could raise their rates.

The State Farm rate increase will go into effect May 1 for new customers and June 1 for renewals. Homeowners who have other policies with State Farm will be entitled to a discount of 20 percent, up from the current 15 percent, Davis said.

Numerous studies have found that injuries and deaths caused by medical errors dwarf the number of actual medical malpractice payments. For example, the Institute of Medicine found in 1999 that 44,000 to 98,000 people die every year due to avoidable errors. Subsequent studies have estimated even higher casualty levels.

You can read much more about this report in Public Citizen’s detailed analysis.