OAI: Regulators' Consumer Advocate Role Shown in Auto Insurance Recoveries

Millions of dollars worth of recovered funds announced last month by regulators in the northeastern U.S. emphasize the important part those regulators play in the industry as consumer advocates, according to Online Auto Insurance.

For a complete picture of an insurer, OAI recommends that policyholders seek a car insurance comparison of prices and combine that information with listings of consumer complaints posted on state regulators' websites.

Regulators are often a last resort in the process of resolving disputes between policyholders and insurance carriers. The majority of the disputes that they handle have to do with claim denials or untimely compensation, according to data from the National Association of Insurance Commissioners.

Connecticut regulators announced Monday that they returned $137,300 to auto policyholders in the first quarter of 2012 and resolved 1,600 complaints and inquiries.

Last week, regulators with the Pennsylvania Insurance Department (PID) announced $3.4 million in collected monies for consumers in the state in the first quarter of 2012. The recovered funds came from 3,211 complaints and inquires and 27 enforcement actions.

In late March, Maine regulators said they recouped more than $2.5 million last year for the state's consumers. Earlier this year, regulators in North Carolina and Michigan announced that, in 2011, they recovered a total of $42.2 million and $25 million, respectively.

But it's not just consumer complaints that regulators follow up on. They play an important consumer advocate role by investigating cases in which a consumer might be unaware they are being taken advantage of.

One of those investigations in Pennsylvania uncovered a case of "forced bundling" within commercial auto policies at Travelers that was recently made public by the PID.

"Forced bundling" is a term used to describe an industry practice of requiring policyholders to buy several kinds of coverage with the same company or face policy cancellation.

In a case they closed in February, PID auditors identified a Travelers file "where notes indicated that if other lines of business were not written with Travelers, the company would have to request coverage be placed elsewhere."

Pennsylvania regulators called the request unacceptable and lodged their concerns in their report, stating that "the company must ensure this practice will not occur in the future."

Source: http://www.portal.state.pa.us/

PID investigators work to find such cases, however small or infrequent, in an effort to identify larger patterns of forced bundling that require enforcement, said Melissa Fox, a PID spokeswoman, in an email.

The department did not fine Travelers for its findings because "the issue didn't rise to the level where a pattern could be established which would justify penalty," said Fox.

Regulators' acute awareness of any instance of the practice in Pennsylvania reflects the vigilant approach regulators across the U.S. are taking.

Last month, Maryland regulators backed a now-stalled bill that would have instituted an explicit ban on the practice. The state's lawmakers debated the prevalence of forced bundling there, with regulators identifying only one insurer, Merastar, which had shown intentions to start the practice before withdrawing its application.

Regulators may have been tipped off to the practice's impact late last year, when tens of thousands of Allstate policyholders in North Carolina and Arkansas faced nonrenewal after they were required to buy both homeowners and auto policies or be dropped by the carrier.

For more on this and related insurance issues, head to http://www.onlineautoinsurance.com/compare/ for access to an easy-to-use quote-comparison generator and informative resource pages.