WASHINGTON, August 29, 2016 — For over two decades now, despite all those television commercials telling America that we can trust them, U.S. insurance companies continue to put themselves first and their policyholders second.
Insurance was once something Americans could rely upon. If disaster struck, we knew our insurance policy was there to protect us. If we made a mistake, and someone else had problems because of what we did — a car accident, for example — we knew our insurance would protect us and cover the other guy as well. We felt secure. We felt safe. We felt that the money we paid to the insurance company was well spent. Our agent cared and wanted the best for us. Our agent felt we mattered.
Insurance was our safety net. For most of us, not having insurance exposed us to the constant threat of financial ruin if just one un-affordable loss were incurred. A single, moderate disaster could devastate us. A lifetime of savings could be wiped out by a single loss. How could we pay our medical bills, rebuild our home, or compensate someone we injured? Insurance traditionally played an indispensable role in our lives and the security and protection was there if we needed it.
Insurance was a profession. In terms of trust, an insurance agent was like our banker, doctor or attorney. Insurers were not just about making money. Our needs were first and foremost, above the needs of the insurance company.
All this changed utterly in the early 1990’s. Insurance companies increasingly focused solely on maximizing profits rather than serving those they insured. The profits of insurance companies became so mind-bogglingly outrageous it almost seemed criminal.
But even as this occurred, policyholders were not told about this change in the values and practices of their insurers. Rather, changes were made to maximize company profits and minimize and delay customer recoveries. Profits are fine, and no insurance company can survive over the long term without them. But what the insurance industry did and continues to do is neither clean nor completely honest.
The United State Supreme Court, in 1914 — yes, 1914, over 100 years ago – stated that the dealings of an insurance company are of the greatest public interest, like those of a bank. Insurers are a depository of the public’s funds, creating a public fund of assurance and credit. Insurers are constrained to act like a bank under a fiduciary principle to maintain the public’s trust and confidence in the public fund.
In other words, almost a century ago, America’s top legal minds recognized not only the importance of insurance in the lives of all Americans. They also recognized the obligations of insurers to us.
Fast forward to 2016. Is your insurer truly “on your side” or “like a good neighbor?” Based on the way you’ve been treated by your insurer, do you sometimes find yourself imagining what it would look like as the caveman’s club smashed that perky gecko’s skull?
Here are some recent examples of property and casualty insurance coverage, 21st Century style:
This month, a judge recommended that State Farm refund tens of millions of dollars to its California customers and lower its rates after finding the insurance behemoth had charged excessive premiums over the past year for rental and home insurance policies. These policyholders should not expect their refund check right away, however. The state insurance commissioner must approve the judge’s recommendations. As of this date, he has yet to concur.
Last year in Texas, after a protracted 12-year legal battle over homeowners insurance rates the state deemed to be excessive, State Farm agreed to refund $352.5 million in premiums to about 1.2 million of its Texas homeowners. The issue arose in the fall of 2003 when the Texas Department of Insurance told insurers operating in the state to lower their rates following a massive legislative insurance overhaul. State Farm was the only major company that refused to do so. It immediately filed suit to block the rate reduction and refund order.
In 2008 Louisiana’s Insurance Commissioner fined Allstate $250,000 and ordered them to reinstate the wind and hail coverage of several hundred customers whose policies were dropped in blatant disregard of a key consumer-protection law. It is the only fine that Louisiana has levied against a homeowners insurance company since Hurricane Katrina, and the fine imposed was the maximum penalty allowed under state law. Allstate had decided that collecting small premiums was not worth the risk of potentially having to pay out huge homeowner damage claims, and the dropping of its coverage left its policy owners effectively naked in the face of future disasters.
In 2007 the Maryland Insurance Administration fined Allstate and its affiliates $750,000 – the largest penalty ever from the state’s regulatory agency – for failing to give tens of thousands of consumers proper notice about their policies, not making required filings with the state, and miscalculating some premiums. Allstate had several prior run-ins with Maryland regulators before incurring the fine. In 2006 they were fined $100,000 and ordered to return $18 million to policyholders who had been improperly notified of higher premiums stemming from accidents or speeding tickets.
In 2015 GEICO agreed to pay $6 million and change discriminatory auto-insurance pricing in a settlement with the California Department of Insurance. According to the California Department of Insurance, GEICO had been misrepresenting their minimum automobile insurance policy liability coverage of $15,000 per person and $30,000 per accident to potential customers it considered less desirable, according to the department. Instead, these customers were given quotes that were more expensive, stating that policies covering $100,000 per person and $300,000 per accident were GEICO’s cheapest available policies in the state, with the intention of causing these individuals to consider look elsewhere for their insurance.
In Montana last year, Liberty Mutual subsidiary Safeco paid a $95,000 fine after shorting reimbursements to more than 35 auto collision victims. Safeco had employed the concept of “comparative negligence” to support cutting the amount paid to both its own customers and those damaged by policyholders, arguing they were partially to blame for the crashes as well. This practice is perfectly legal. But in many of the cases involved, Safeco chose to ignore the objective facts as reported for the actual accident according to the state agency that eventually investigated 16 months of claims experience.
In 2013 in California, Safeco paid a $900,000 fine, refunded more than $3 million to its customers, and agreed to reform its approval process for homeowners and auto insurance coverage. The company was fined for the unapproved use of credit scores to deny homeowners coverage, for failing to follow its own approved rating guidelines and for other auto rating violations.
In 2009 in Connecticut, Liberty Mutual companies paid $928,042 in fines and restitution for overcharging customers, settling claims improperly and other violations of state insurance law. That total is one of the largest amounts Connecticut has ever collected from an insurance company. Fines for violations totaled $296,000 and Liberty Mutual also was ordered to pay $632,042 in restitution. Most of that amount – $628,875 – was returned to 3,595 policyholders who were overcharged for premiums on auto insurance.
The moral of the story: A visit to an attorney to review all your insurance coverage is advised.
Paul A. Samakow is an attorney licensed in Maryland and Virginia, and has been practicing since 1980. He represents injury victims and routinely battles insurance companies and big businesses that will not accept full responsibility for the harms and losses they cause. He can be reached at any time by calling 1-866-SAMAKOW (1-866-726-2569), via email, or through his website.
His book “The 8 Critical Things Your Auto Accident Attorney Won’t Tell You” can be instantly downloaded, for free, on his website: http://www.samakowlaw.com/book.
Samakow has now also started a small business consulting firm. His new book “Step By Step, Achieve Small Business Success” is available at www.thebusinessanswer.com.