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Insurance Companies: Service or Shenanigans

Last week, the Kansas City Star ran a series of articles it titled Insurance Companies: Service or Shenanigans. According to the first article in the series, the paper spent 11 months examining insurance problems, including an analysis of a national database with more than 600,000 complaints filed from 2003 through 2005. In all, the newspaper analyzed nearly 35 million records. The series is particularly interesting to Texas customers because several of the sources and studies quoted were based in Texas.

The first installment discussed the general complaints the authors found against insurance companies. Summing up the first day’s findings, the paper stated:

Upset insurance customers slug it out daily with billion-dollar companies over thousands of dollars or mere pennies. They filed 246,000 complaints over auto insurance, 133,000 over group health insurance and 70,000 over homeowner’s coverage during the time of the analysis. Most of the time, consumers were right. The analysis showed that state insurance regulators sided with consumers 60 percent of the time.

In addition to discussing many types of complaints, supplementary articles provide lists of those insurance companies with the most (and fewest) complaints.

The second installment discussed unscrupulous agents who do things such as taking premiums but not actually purchasing insurance. We found this installment particularly informative since we have represented several clients over the years (both individuals and businesses) who have been victims of this type of fraud and deceptive trade practices. In our most recent case, the client was a victim of both the insurance agent and the insurance company. The business purchased insurance through an agent. The agent supposedly bought insurance through a small company based in the Caribbean. Unfortunately, the agent did not adequately investigate the company and did not learn, like many others knew, that the company was bogus and not actually providing any insurance.  Imagine the client’s surprise when it attempted to make a claim on the policy and learned that (1) that the company didn’t really exist; but (2) that many state insurance bodies around the country had been investigating the person for quite some time and that it’s agent didn’t take the time to find this out.

In conjunction with this installment were several ancillary articles discussing various types of insurance fraud by consumers that harm all of us, particularly those who are presenting legitimate claims for payment.

Finally, the third installment discusses the lack of oversight of the insurance industry. On the federal level, insurance companies are exempt from anti-trust regulation. This means that insurance companies are allowed to share data between one another relating to prices so that the companies can engage in price-fixing. And what little other regulation there is, is largely ineffective. This installment began:

U.S. insurance companies boast assets of $5.6 trillion. They benefit from virtually no federal oversight. And the state officials who do regulate insurance companies often are drawn from the industry they police. That’s how insurance regulation works in America. But too often it may not be working for you.

Because all of us are consumers of some type of insurance, I hope that everyone would take time to at least scan the articles so that none of us are the victims that are being discussed next time.  And if you are in Texas and are a victim of insurance fraud, please feel free to call us.

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