Why consumers complain to the Insurance Commissioner

By Jeffrey P. Downer

Insurance consumers’ biggest complaints about insurers last year were delays in claims handling, denials of claims, and low settlement offers, according to a new study by the National Association of Insurance Commissioners.

NAIC is a voluntary organization of the chief insurance regulatory officials of the 50 states. States submit data to NAIC on closed files that those regulatory officials have handled, and NAIC compiles the data and releases annual reports on its findings.

For 2008, NAIC analyzed nearly 196,000 consumer complaints. Of those, 19 percent were for delays in handling claims, more than 18 percent were for denials of coverage claims, and 14 percent were for unsatisfactory settlement offers from insurers. Other types of complaints included disputes over premiums and ratings and cancellation of insurance policies. The results of NAIC’s study of 2008 complaints matched a three-year trend. In 2006 and 2007, as well as 2009, delays were the leading type of consumer complaint.

According to the NAIC study, about 38,000 of the 196,000 complaints in 2008 were resolved by providing the consumer with additional information. Most of the rest were resolved amicably. In surprisingly few cases, just 656, did the consumer retain a lawyer or file suit.

In the state of Washington, the top three complaints of consumers against insurance companies were the same as the national trend, although in different order. The leading complaints in Washington are unsatisfactory settlement offers, denials of claims, and delays.

As to all three of these types of complaints, the Washington Insurance Commissioner's claims-handling regulations impose specific requirements on insurers. For example, to prevent delays in payment of claims and “lowball” settlement offers, Washington’s regulations require insurers to attempt “in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.” WAC 284-30-330(6). This regulation also requires prompt settlement of property-damage claims and prohibits an insurer’s delaying payment where another insurer might owe part of the loss.